Maggie King Econ 3004 Non-technical Paper 2/21/14 To Raise or Not to Raise the Minimum Wage The issue

of the minimum wage in our country has been a heated topic of debate for decades. At the start of President Barack Obamas second term, he sternly vowed to do something about raising the federal minimum wage. The attitude towards raising the minimum wage is extremely divided, and policy implications recently reflect that. Democrats generally back policy moves to increase the minimum wage arguing that it will bring lower class workers out of poverty and provide the means for a more comfortable standard of living. Republicans on the other hand generally argue that raising the minimum wage is a harmful policy implication and should be avoided. They argue that in doing so, instead of bringing the lower class working population out of poverty, it will instead create a situation in which it will be more expensive for employers to hire labor, especially young, lower class, and low skilled workers. This paper aims to analyze fairly recent and current policies regarding minimum wage, and the arguments for and against raising it. The main article being analyzed is from the American Enterprise Institute, titled Why We Shouldn't Raise the Minimum Wage that while clearly arguing against raising the minimum wage successfully presents the pros and cons of both sides of the issue. The argument for raising the minimum wage, and specifically President Obamas initiative to raise it to nine dollars an hour, centers on the concern towards eliminating poverty. In a statement released by the White House the President called upon Congress to aid him in his effort to raise the minimum wage from $7.25 to $9.00 in stages by the end of 2015 and index it to inflation thereafter. In doing this President Obama firmly believes that

"!

as a direct result of this increase, there would be a significant boost in wages for 15 million workers, as well as move to reduce poverty and inequality in our country.1 Even more recently, Obama backed the Democrats proposal to go beyond a minimum wage increase to $9.00, and increase it further to $10.10. By increasing pay, the hope is to bring people, particularly low-class workers, out of poverty by providing them with means to better their standard of living. Democrats believed that a wage increase to $9.00 was not progressive enough, and that a wage over $10.00 an hour was needed to effect real change and economic improvement. Research has time and time again shown that if minimum wage had kept pace with inflation since its high in the late 1960s, it would now be well above $10.00.

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! "!Carney, Jay. "Re: Fact Sheet: The President's Plan to Reward Work by Raising the Minimum Wage." The White House. N.p., 13 Feb. 2013. Web. 19 Feb. 2014. <http://www.whitehouse.gov/the-press-office/2013/02/13/fact-sheet-president-splan-reward-work-raising-minimum-wage>. ! ! #!

Figure A shown above emphasizes this point.2 This graph, from the Economic Policy Institute, depicts the annual earnings of a minimum-wage worker compared with the federal poverty line for a small family. The graph effectively shows that up until the 1980s, earning the minimum wage was enough to lift a single parent out of poverty. In fact, a minimum-wage income in 1968 was actually higher than the poverty line for a family of two adults and one child. But as the figure shows, as the years go on this becomes less and less the case. Todays minimum wage is not enough for single parents to reach even the most basic standards of living, much less adequately provide for their families comfortably. Furthermore, in terms of the attitude surrounding such policy efforts, raising the minimum wage is a smart policy strategy particularly in regards to a working class audience. It is a popular implication particularly with the workforce, and more specifically the voters. Therefore, politically speaking there is a strong incentive to raising the wage. The argument against policy implications that would raise the minimum wage argue that people in poverty do not work in the first place, so raising the minimum wage would not affect them. Additionally, research published by the American Enterprise Institute for Public Policy Research in March of 2013 found that in 2010 if the federal minimum wage were increased from $7.25 an hour to $9.50 an hour, only 11.3% of workers who would gain from the increase belong to poor households.3 Therefore this demonstrates that maybe raising the minimum wage is not a positive policy choice. The !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! #!Cooper, David, and Doug Hall. "Raising the Federal Minimum Wage to $10.10 Would Give Working Families, and the Overall Economy, a Much-needed Boost." Economic Policy Institute. N.p., 13 Mar. 2013. Web. 19 Feb. 2014. ! $!Hassett, Kevin A., and Michael R. Strain. " Why We Shouldn't Raise the Minimum Wage. American Enterprise Institute for Public Policy Research. N.p., 10 Mar. 2013. Web. 19 Feb. 2014. ! ! $!

graph below from the Bureau of Labor Statistics depicts the real minimum wage compared to minimum wage if it was tied to productivity. It shows that solely raising the minimum wage may not have all of the positive effects that President Obamas policies are predicting.

Those opposed to raising the wage vehemently argue that it will not be a productive and successful policy move. In fact, raising the minimum wage will actually make it more expensive for businesses to hire young and low-skill workers. And this, at a time of almost record high unemployment is a seriously negative unintended effect. Additionally, it will not alleviate poverty. As mentioned above, many families suffering in poverty are not working and therefore will not directly benefit from this wage increase. It will actually most likely now be harder for them to find jobs in the first place because labor will be more expensive. If poverty eradication is President Obamas true goal, then there are other policy efforts that could be implemented that would be better tailored to directly aiding

%!

these poverty stricken families, increasing the minimum wage is not one of them according to the opposition to the policy. President Obamas policy implication vows to bring families out of poverty, create a better standard of living for working class Americans, and create a significantly greater number of jobs accompanied with livable wages. Those opposed to raising the minimum wage argue that if getting rid of poverty is the goal, there are better ways in which to go about that because solely raising the minimum wage will not directly benefit many of the lower-class and poverty stricken families. Additionally, they argue that raising the minimum wage will make it more difficult and more expensive for businesses to hire labor, particularly young and lower skilled workers. As a result, that actually means fewer jobs in the economy, the exact opposite intention of the increased wage policy. While the attitude surrounding increasing the minimum wage varies from strongly in support to vehemently against, the fact remains that something must be done to improve economic conditions and raise American families out of poverty.

&!

Works Cited

Baker, Dean, and Will Kimball C. "The Minimum Wage and Economic Growth." CEPR. Center for Economic and Policy Research, 12 Feb. 2013. Web. 19 Feb. 2014. <http://www.cepr.net/index.php/blogs/cepr-blog/the-minimum-wage-andeconomic-growth>.

Carney, Jay. "Re: Fact Sheet: The President's Plan to Reward Work by Raising the Minimum Wage." The White House. N.p., 13 Feb. 2013. Web. 19 Feb. 2014. <http://www.whitehouse.gov/the-press-office/2013/02/13/fact-sheet-president-splan-reward-work-raising-minimum-wage>.

Cooper, David, and Doug Hall. "Raising the Federal Minimum Wage to $10.10 Would Give Working Families, and the Overall Economy, a Much-needed Boost." Economic Policy Institute. N.p., 13 Mar. 2013. Web. 19 Feb. 2014.

Hassett, Kevin A., and Michael R. Strain. " Why We Shouldn't Raise the Minimum Wage. American Enterprise Institute for Public Policy Research. N.p., 10 Mar. 2013. Web. 19 Feb. 2014.

Jamieson, Dave. "Obama Gets Behind Democrats' $10.10 Minimum Wage Proposal." The Huffington Post. TheHuffingtonPost.com, 07 Nov. 2013. Web. 19 Feb. 2014.

'!

United States. U.S. Department of Labor. Bureau of Labor Statistics. Real Earnings. U.S. Bureau of Labor Statistics, 20 Feb. 2014. Web. 20 Feb. 2014. <http://www.bls.gov/bls/newsrels.htm#OEUS>.

(!