Opponents argue minimum wage laws increase unemployment (especially for youth/low-skilled), force businesses to cut jobs or hours, automate, or raise prices (causing inflation), hurting the very people they aim to help by increasing the cost of living, and distorting free-market labor principles, while some argue it reduces incentives for skill development and doesn't help the truly poor, as many minimum wage earners aren't primary breadwinners.
Opponents believe that higher wages could lead to inflation, make companies less competitive, and result in job losses.
NEGATIVE IMPACTS OF LOW MINIMUM WAGES
At the individual level, a minimum wage lower than the hourly wage a person needs to afford shelter, food, and essentials (i.e., living wage), directly impacts the quality of life for low-income workers and their ability to afford basic needs.
Minimum wages reduce employment opportunities for youths and create unemployment. Workers miss out on on-the-job training opportunities that would have been paid for by reduced wages upfront but would have resulted in higher wages later.
A $15 minimum wage by 2024 would generate $120 billion in higher wages for workers and would also benefit their communities. Because lower-paid workers spend much of their extra earnings, this injection of wages will help stimulate the economy and spur greater business activity and job growth.
Minimum wages are fundamental to attracting economic development, improving the welfare of workers, and reducing income inequality. Minimum wages ensure an improved standard of living due to increased disposable income and productivity, which benefits not only workers but also whole economies.
The minimum wage was designed to create a minimum standard of living to protect the health and well-being of employees.
Adding a federally mandated cost in the form of increased minimum wage would lead to longer unemployment, reduced work hours or hiring, and increased layoffs for low-wage workers as businesses balance reduced revenues and increased costs.”
It is also important to note that the impact of a higher minimum wage is greater for women than for men because low-wage women have lower wages ($4.50) in the absence of a new minimum. The minimum wage also has its greatest effect on those who have not completed high school (“Less than High School”).
In addition, even in the absence of adverse employment or human capital effects, minimum wage-induced wage gains could lead to more crime if increased earnings are used to purchase durable goods (Aaronson et al. 2012) such as new smartphones or laptops that may be more likely to stolen (Diliberti et al. 2017).
If Minimum Wage Matched Productivity Growth
If the minimum wage had kept pace with both inflation and productivity growth, the Economic Policy Institute estimates it would sit around $23 to $24 per hour today. At $23 per hour full-time, you'd earn $47,840 annually. That's $32,760 more than the current minimum wage.
The real value of the federal minimum wage in 2022 dollars has decreased by 46% since its inflation-adjusted peak in February 1968. The minimum wage would be $13.46 in 2022 dollars if its real value had remained at the 1968 level. See chart to right.
How much is the national minimum wage?
A living wage is simply the minimum hourly amount that a full-time worker must earn to afford basic necessities. In this case, a full-time worker is defined as someone who works at least 2,080 hours a year.
Any Econ 101 student can tell you the answer: The higher wage reduces the quantity of labor demanded, and hence leads to unemployment. This is one reason why 72 percent of US-based economists oppose a federal minimum wage of $15.00 per hour.
Minimum wages reduce employment opportunities for youths and create unemployment. Workers miss out on on-the-job training opportunities that would have been paid for by reduced wages upfront but would have resulted in higher wages later.
Luxembourg. Luxembourg offers the highest minimum wage of any country worldwide at US$3,670 (€3,165) per month for skilled talent over the age of 18. Unskilled talent and talent under the age of 18 receive a lower monthly minimum wage: Unskilled workers 18 years of age and older: US$3,051 (€2,638)
It has been well documented that the minimum wage destroys jobs, particularly the jobs of low- skilled, young workers. However, there are other equally pernicious side effects of higher minimum wages. Higher minimum wages make it more difficult for people to leave welfare and induce high-school students to drop out.
In 2023, 80.5 million workers age 16 and older in the United States were paid at hourly rates, representing 55.7 percent of all wage and salary workers. Among those paid by the hour, 81,000 workers earned exactly the prevailing federal minimum wage of $7.25 per hour.
No Incentive for efficiency:
This method does not distinguish between efficient and inefficient workers. The payment of wages is related to time and not output. Thus, the method gives no incentive for more production. Efficient workers may start to follow inefficient persons because rates of pay are same.
Minimum wage
However, not everyone is automatically entitled to get this. Workers under 18 are only guaranteed up to 70% of the national minimum wage, which is €9.91 per hour. Your employer can pay you more than the minimum wage if they want, but they are not required to do so by law.
The purpose of minimum wages is to protect workers against unduly low pay. They help ensure a just and equitable share of the fruits of progress to all, and a minimum living wage to all who are employed and in need of such protection.
In fact, had the federal minimum wage kept pace with workers' productivity since 1968 the inflation-adjusted minimum wage would be $24 an hour. The labor movement has long advocated that working people share in the wealth we help create and our incomes should rise as we become more productive.
The potential benefits of minimum wage policy in terms of higher earnings for low paid workers, reduced public benefits, and increased perceived fairness should be Page 7 3 juxtaposed against the potential costs: reduced employment and hours for the low paid.
Benefits you can claim if you are not working or are on a low...