By Daniel Sperling
Is the minimum wage high enough today? Increasing the minimum wage could decrease poverty, benefit company productivity, and boost the economy. But is increasing the minimum wage really that simple?
In 1938, the United States Congress passed 29 U.S. Code § 201, otherwise known as the Fair Labor Standards Act (FLSA), which effectively shaped the history of United States labor law and regulation. The legislation introduced many characteristics of the work force that still exist today, including the minimum wage requirement.
The minimum wage is the base level that an employer can pay its employees as regulated on a federal and state/local government level. In 2007, the Fair Minimum Wage Act of 2007 was passed which gradually increased the federal minimum wage from $5.15 to $7.25 over two years. Currently, twenty-nine states have minimum wage legislation that ensures wages hirer than the federal standard, fourteen states have minimum wage legislation equivalent to the federal government, and five states have no minimum wage legislation. Two states, Wyoming in Georgia, have minimum wage laws that actually guarantee an amount less than the federal government, meaning that employees not covered under the FLSA are subject to the lower wage, which is $5.15 in both states.
As of 2014, about 3 million workers were paid wages at or below the federal minimum wage, making up 3.9% of all hourly paid workers in the entire workforce. The problem is that workers paid at the minimum wage level even at max working capacity are extremely close to the poverty line in this country. The poverty line is the official income determined by the Office of Management and Budget and used as a “criterion of eligibility in the community services block grant program.”
There have been large movements across the entire country to increase the minimum wage, such as the aptly named Fight for $15 movement. This organization wants the federal government to increase the federal minimum wage to $15 per hour, and is just one of the many organizations that supports such an increase. The Economic Policy Institute argued that an increase of the minimum wage to $12 would provide raises to 35 million workers directly and indirectly, would benefit the economy by pumping billions of dollars into earnings of workers who would spend the money on basic needs, and would be economically sustainable. Undeniably, a raise in the minimum wage would increase the standard of living for those minimum wage workers directly affected by the increase.
Many researchers tend to agree that increasing the minimum wage rate would lead to a decrease in poverty levels, which is obviously a change for the better in a country where the current poverty rate is nearly 13.5% of the country. Investopedia also cites a host of intangible benefits such as improved employee morale, which in turn could benefit productivity for companies and help them reach their production and financial goals, and could increase employee retention which in turn would reduce hiring costs and associated training costs. However, while many proponents of an increased minimum wage argue a host of benefits, there are also a myriad of counterarguments which assert that a minimum wage increase would have no effect or potentially a negative effect. These negative implications of a minimum wage increase will be discussed in the follow-up blog post, What to Do with the Minimum Wage: Counter Arguments (Part Two).