Raising the federal minimum wage will also stimulate consumer spending, help businesses' bottom lines, and grow the economy. A modest increase would improve worker productivity, and reduce employee turnover and absenteeism. It would also boost the overall economy by generating increased consumer demand.
The Pros Outweigh the Cons (Up to a Point)
Some research shows that a minimum wage can increase the number of jobs in an economy. 11 Businesses find other ways to offset higher labor costs. They raise prices or reduce the number of hours worked. Worker morale, productivity, and consumer spending all increase.
Raising the wages of low-income workers will stimulate the economy; substantially lower the amount the country spends on social safety net programs such as SNAP; and reduce economic inequality, thereby unleashing additional economic growth in a period of recovery.
The federal minimum wage of $7.25 per hour has not changed since 2009. Increasing it would raise the earnings and family income of most low-wage workers, lifting some families out of poverty—but it would cause other low-wage workers to become jobless, and their family income would fall.
Also, increases in the minimum wage will actually redistribute income among poor families, where some are given higher wages and others are put out of work. 3. It can create unemployment. In a free labor market, salary rates would reflect the willingness of employers to hire them and the willingness of workers to work.
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.
Arguments for Raising Minimum Wage: It Will Benefit Millions, Lift Struggling Workers Out of Poverty. The CBO report does have some silver linings: It estimates a federal minimum wage hike to $15 per hour would lift nearly one million people out of poverty and nearly 27 million workers would be affected by the increase ...
Opponents of raising the minimum wage believe that higher wages could have several negative repercussions: leading to inflation, making companies less competitive, and resulting in job losses.
But many recent state and city-level minimum wage increases have been scheduled to be implemented over time and often are indexed to some measure of price inflation. ... They also observe that small minimum wage increases do not lead to higher prices and may actually reduce prices.
Wage push inflation has an inflationary spiral effect that occurs when wages are increased and businesses must — to pay the higher wages — charge more for their products and/or services. ... If prices remain increased, workers eventually require another wage increase to compensate for the cost of living increase.
Raising the minimum wage to $15 an hour would significantly reduce poverty and increase earnings for millions of low-wage workers, while adding to the federal deficit and cutting overall employment, according to a new study from the nonpartisan Congressional Budget Office.
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