Term Project Minimum Wage

Bonnie Barlow
Salt Lake Community College

The minimum wage In the United States started with the Fair
Labor Standards Act (FLSA) in 1938, which was originally introduced by

President Roosevelt (Grossman, n.d.). During this time, Roosevelt was finding
the best solutions to aid the American people after the Depression and FLSA
Act was one action he had been able to take, which later developed into the
National Industrial Recovery Act (NRA) (Grossman, n.d.). The initial minimum
was set to $0.25 an hour, which was $3.98 when adjusted for inflation to
2012 (Labor U. D., 2012). This bill faced a lot of business opposition much
like current days businesses fighting against minimum wage. Roosevelt even
pointed right to the business executives saying, "Do not let any calamityhowling executive with an income of $1,000 a day, ...tell you...that a wage of
$11 a week is going to have a disastrous effect on all American industry."
(Grossman, n.d.). To clarify Roosevelts meaning of minimum wage or a living
wage he is quoted saying, It seems to me to be equally plain that no
business which depends for existence on paying less than living wages to its
workers has any right to continue in this countryand by living wages I
mean more than a bare subsistence level-I mean the wages of decent living.
(Roosevelt, 1933). The current required minimum wage to be paid is $7.25
federally, but this is not a living wage (MIT, 2016). With this background
knowledge of the beginning of the minimum wage and the expectations
initially made, should businesses be able to determine the wage paid to
employees, or should they be required to pay the minimum living wage for
the area the company operates in? Through determining the impacts of
minimum wage on businesses and workers surely an answer can be
concluded.

When minimum wage is looked at being increased there are

two types of businesses that input is needed from, large and small. Starting
with small businesses there have been many studies done to question
reactions small business owners have about a wage increase. Per a Forbes
article about small businesses in San Francisco, plenty of small businesses
support the increase wage efforts and already actively pay their employees
higher than the required minimum wage (Adams, 2016). However, these
same small businesses know they would have to absorb the minimum wage
increase; with a slim profit margin in some cases, and competing with larger
retailers it would be hard to stay in business (Adams, 2016). For a large
business, Rensi, a former president and CEO of McDonalds, stated that it
would not close the company down, but it would remove many entry level
jobs opportunities (Rensi, 2016). Current labor is cheaper than the robot
automated replacements which Rensi said would likely replace entry level
employees if the minimum wage were to be raised (Rensi, 2016). Another
large corporation that is frequently criticized for its low wages is Walmart.
Walmart has subsequently raised their minimum wage to $10 an hour in
some stores and noticed that there has been increased store ratings as well
as morale and productivity from its employees (DC, 2016). This suggests that
Walmart may be able to sustain a wage increase, but The Economist is quick
to point out that other food-and-drink industries would have greater risks
than Walmart because of their profit margin being lesser than Walmarts (DC,
2016).

The first grievance most minimum wage workers, or workers

who make less than a living wage, feel is the anxiety of losing their job. In an
interview with Erik Martin, a worker who makes less than his states living
wage, he mentioned that some of his foremost concerns would be the loss of
his job as well as price increases (Martin, 2016). There are several studies
that mention possible future loss of jobs like Rensi who said with wage hikes
would come more automation when referring to an increase to $15 (Rensi,
2016). However, the Department of Labor says job loss is likely a myth,
sighting more than 600 economists, including 7 Nobel Prize winners wrote
[to President Obama], "In recent years there have been important
developments in the academic literature on the effect of increases in the
minimum wage on employment, with the weight of evidence now showing
that increases in the minimum wage have had little or no negative effect on
the employment of minimum-wage workers, even during times of weakness
in the labor market (Labor D. O., n.d.). This means that even if a wage
increase was put into effect during a time when jobs are harder to find it still
would not necessarily have a negative outcome for the minimum wage
workers. Another concern for the interviewee Erik was price increases
(Martin, 2016). Though it is hard to say what a large minimum wage increase
would produce, some cities are already attempting to monitor any affects
that might happen, like Seattle. The University of Washington has several
people already watching the impact of their $15 minimum wage increase
overtime, right now the raise is not fully in effect and thus the current

conclusion is, Our preliminary analysis of grocery, retail and rent prices has
found little or no evidence of price increases in Seattle relative to the
surrounding area, (Kelley, 2016). Seattle has not felt the full impact of their
wage increase, but prospects are good at the point.
Apart from the worries of raising the minimum wage, there are
many good outcomes as well. For example, the Fight for $15 movement
posted a video of a worker named Amanda Monroe who lives off of $8.75 an
hour which must cover her and her sons expenses for the month, but this
leaves her $400 short each month ($15, 2015). If the minimum wage was
raised to a living wage for her it would mean being able to meet all
obligations and occasionally buying something extra for her son ($15, 2015).
The Bureau of Labor Statistics also shows in a report on 2014 that the
majority of minimum wage workers who would receive a wage increase are
women of any race (Report, 2014).
With wages impacts to businesses and workers it is hard to
come to an equal ground to keep both parties happy. In some cases,
mentioned above, a small business may not be able to survive a large wage
increase, while other large business would survive, but also possibly cut jobs.
There are worries that workers making below a livable wage have, but
generally it seems like the impacts would not be severe enough to change
the workers situation negatively. Using the Living Wage Calculator created
by MIT it is apparent that an overall federal wage raise to $15, as the fight
for $15 movement demands, would be higher than a living wage in the

majority of the US (MIT, 2016). This same calculator also shows that in some
areas the minimum wage is not close to a livable wage; in Salt Lake City,
Utah the minimum wage is the same as federal, $7.25, but a livable wage
would be $10.85 (MIT, 2016).
To satisfy each party it would likely be best to set a federal
wage to more around $9 and allow cities and counties to raise their wage in
accordance to how they need it. In this situation a business would be able to
rely on the spending power of the area to cover the wage increases which
may produce small price increases, however, this would not give the livable
wage control to the businesses; the government and the people voting in the
government would control the overall way to determine a living wage. The
businesses would be able to control higher wages, but the livable wage
should be left to be a good outcome for the worker instead of the business.

References
$15, F. f. (2015). Amanda and her 3-year-old son Ocean explain why we REALLY
need $15 today [Recorded by A. Monroe]. New York, New York, US.
Adams, S. (2016, Mrch 31). What A $15 Minimum Wage Means For Three Small
Businesses In San Francisco. Retrieved from Forbes:
http://www.forbes.com/sites/susanadams/2016/03/31/what-a-15-minimumwage-means-for-three-small-businesses-in-san-francisco/#2bc8379d1777
DC, W. (2016, Jan 30). High Expectations. Retrieved from The Economist:
http://www.economist.com/news/united-states/21689607-what-big-pay-risewalmart-means-minimum-wage-debate-high-expectations
Grossman, J. (n.d.). Fair Labor Standards Act of 1938: Maximum Struggle for a
Minimum Wage. Retrieved from Department Of Labor:
https://www.dol.gov/general/aboutdol/history/flsa1938

Kelley, P. (2016, April 18). Early analysis of Seattles $15 wage law: Effect on prices
minimal one year after implementation. Retrieved from UW Today:
http://www.washington.edu/news/2016/04/18/early-analysis-of-seattles-15wage-law-effect-on-prices-minimal-one-year-after-implementation/
Labor, D. O. (n.d.). Minimum Wage Mythbusters. Retrieved from Department of
Labor: https://www.dol.gov/featured/minimum-wage/mythbuster
Labor, U. D. (2012). Minimum Wage - U.S. Department of Labor - Chart1. Retrieved
from Department Of Labor: https://www.dol.gov/featured/minimumwage/chart1
Martin, E. (2016, October). How minimum wage effects you. (B. Barlow, Interviewer)
MIT. (2016). Living Wage Calculation for Salt Lake City, UT. Retrieved from Living
Wage Calculator: http://livingwage.mit.edu/metros/41620
Rensi, E. (2016, April 25). The Ugly Truth About A $15 Minimum Wage. Retrieved
from Forbes: http://www.forbes.com/sites/realspin/2016/04/25/mcdonaldsminimum-wage-reality/#5dc00a8658bb
Report, B. (2014). Characteristics of Minimum Wage Workers, 2014. U.S. Bureau of
Labor Statistics.
Roosevelt. (1933, June 16). Our Documents: National Industrial Recovery Act.
Retrieved from Our Documents: http://docs.fdrlibrary.marist.edu/odnirast.html

Appendix
Interview Notes with Erik Martin:
What is your current wage? About $9.5
Does it cover your expenses? Covers most expenses, but with little to no
extra money. Lives in a friends house for less rent than average

Would you want a wage increase? Talked about how it would increase the
prices of too many goods to make a wage increase make sense, it would
place them in the same situation as before.
Do you feel like you are paid enough for what you do? No.
Why do you not get a different job? Other jobs are worse and still pay the
same amount.