Automating can also be useful for lowering startup costs if youre starting a new enterprise. I can't think of anything more devastating at a time when our small businesses are barely getting back on their feet," said Rep. Elizabeth Ann Van Duyne, R-TX. 20 Raising the Minimum Wage Pros and Cons - Helpful Professor If the Raise the Wage Act of 2021 is enacted, employers will be responsible for raising wages beyond just those making $7.25 every employee making between $7.25 and $15 will experience raises until their wages meet the new federal minimum. The legislation is currently included in the House version of the $1.9 trillion relief package that is set for a vote on Friday, but it's unclear if that provision will pass the Senate. An increase in minimum wage decreases the size of the gap between the richest and the poorest workers, improving income inequality. The Federal Reserve Bank of Chicago reports that a $1 increase to the minimum wage will boost consumer spending in households at that income level by over $2,000. Higher minimum wages would disproportionately affect lower-income households positively, as these households tend to spend a larger percentage of their income. Several large corporations have also established a minimum wage that is beyond the federal requirement in recent years. A protester attends a rally held by fast food workers and supporters to celebrate the California Labor Commissioners order for the company to rehire and compensate workers who went on strike for coronavirus disease (COVID-19) protections, in Los Angeles, California, February 18, 2021. That could represent 50% of the annual rent or mortgage expense, 18 months worth of groceries, or 40% of the familys housing expenditures. Raising the federal minimum wage to $15 per hour would increase wages for 17 million U.S. workers, according to the Congressional Budget Office. The jobless rate for the United States at the same time was 4%. Although In the US the minimum wage is still $7.25 per hour, there are other 29 states and D.C. that have approved higher minimum wages. What a $15 Minimum Wage Could Do to Our Economy: Pros and Cons This disadvantage could flatten the economys value over time as those without a GED or high school diploma make up to 40% less in total earnings. At the time of its entry into force, the FLSA covered employees engaged in interstate commerce and those working in industries that produced goods for interstate commerce. How a $15 minimum wage could boost Social Security benefits - CNBC Outsourcing and offshoring could become significant job killers. That's because there are many full-time, adult hourly employees who are earning just above the minimum wage, but still earning less than $15 per hour. That's going to put these women in a bind," Greszler says. Wage growth for the entire economy rose faster in 2017 than it has in the last decade, but at the same time, the substantive power of those earnings has depreciated since 1980 for households within the middle class. About 1.1 million hourly workers earned wages that were at or below the minimum wage last year, according to the Bureau of Labor Statistics. If enacted, the pros and cons of raising minimum wage may necessitate changes in how employers conduct business. The most recent update to the . The Raise the Wage Act isthe first proposal to make a $15 wage the federal minimum. These days everyone wants something extra instead of the same boring life but fail to achieve it with the fast pace and low income. If the minimum wage were to increase to $15 per hour, then some students might choose to drop out of school to begin working a job instead. One-third of Hispanic workers and 40% of black workers would receive a raise. Speaking with analysts last month, McDonald's CEO Chris Kempczinski said the fast-food giant would do just fine'' as long as the wage increase applied to everybody. At LendingTree, we are committed to providing accurate and actionable content that helps you make informed decisions about your money. Introducing the all-new LendingTree Win Card. After 2024, the minimum wage would be indexed to median wage growth of all employees to keep up with inflation. Our team of writers and editors follows these key guidelines: LendingTree, LLC is a Marketing Lead Generator and is a Duly Licensed Mortgage Broker, as required by law, with its main office located at 1415 Vantage Park Drive, Suite 700, Charlotte, NC 28203, How to handle the effects of raising the minimum wage, Employee Loans: What To Know Before Loaning Money to Employees, How to Pay Yourself as a Small Business Owner. The minimum wage is the lowest amount an employer can pay their employee, as mandated by federal law. Additionally, if workers are satisfied with their wages they are more likely to be productive and less likely to leave their job. The bill, introduced last month by Rep. Jason Dawkins and Rep. Patty Kim, would gradually raise the state's minimum wage over the next three years, beginning with a jump to $11 per hour in 2024 . Then again, the pandemic has also exposed how difficult life is at the bottom of the income ladder. 1. Washington D.C. and New York City have already enacted a minimum wage of $15 per hour. We deliver research to your inbox. Introduced in January 2021, the Raise the Wage Act of 2021 aims to increase the federal minimum wage to $15 per hour by 2025. Technology and software make it possible to automate certain business operations, reducing the need for human labor. Economists have argued the merits of minimum wage increases for years. But groundbreaking research in the 1990s suggested that the Econ 101 version was simplistic at best. Additionally, most affected workers (55.6%) would be women(EPI). Analysts suggest that these moves are a result of a combination of political pressure (seeStop Bezos Act) and a tight labor market which forces corporations to compete for labor (seeunemployment rates at historic lows). Opponents have seized on that point, but the agency acknowledges it is "manifestly more uncertain than most of the rest" of the analysis. We want to hear from you. The fate of Biden's minimum wage proposal remains hazy. And there are other surprising benefits: "Raising the minimum wage by 10 percent could reduce suicides by 3.6 percent among adults with a high school degree." — -- Economists are mixed about whether or not states should gradually raise their minimum wage to $15 an hour -- an issue that's front and center after California lawmakers said they would do just that by the year 2020. Is a $15 Minimum Wage Worth the Costs? - The Heritage Foundation Something went wrong. His plans to save for college are on hold indefinitely. This outcome can reduce hiring costs and reduce the adverse effects that high employee turnover rates can cause. The increment in the minimum wage also projects towards an issue of potential job losses. Even with the hike in the minimum wage, the actual value of wages earned in that first year of the higher amount was 7.8% lower than what the minimum wage in 1967 was near its peak. [E]specially now, I think many [restaurants] are simply unable to absorb those costs.. Economists say it would lift many people out of poverty, Memorial Coliseum is immersed in Van Gogh's work with new exhibit, Wrongful death lawsuit filed against county officials, jail officers, health contractor, Fort Wayne City Council votes to limit terms of its appointees. We've done the research on 51 minimum-wage increases in 45 states and found that "higher minimum wages do not have adverse effects on employment." The cost of some software may be an affordable alternative to hiring a full-time employee making $15 per hour. Sign up for free newsletters and get more CNBC delivered to your inbox. The wage gap between men and women decreased by just 2% from 2008 to 2017. With a higher minimum wage that extends to all worker opportunities, there is a real chance to keep experienced workers happy. What a $15 Minimum Wage Could Do to Our Economy: Pros and Cons By Matthew Makowski Mar 22, 2021 at 4:25PM The $15 minimum wage debate continues to reverberate across the country. The CBO report found that the federal minimum wage increase to $15 would reduce employment in the U.S. by 1.4 million, or about 0.9%. The move will affect the close to 12 per cent of Ontario workers who earn minimum wage, as well as all facets of the economy linked to their labour. It hasnt seen a meaningful boost in this required amount for more than a decade. Remains of missing actor Julian Sands found on Mount Baldy, DeSantis' call to end birthright citizenship marks new era for Republicans, Ireland will pay you $90,000 to move to one of its remote coastal islands, Pope Francis investigates Texas bishop, replaces embattled Tennessee prelate. Boosting employee morale can easily turn into more and more tangible benefits. Raising the minimum wage to $15 could improve local tax revenues. The debate over raising the minimum wage is gaining steam, as lawmakers on both sides of the aisle weigh the benefits and consequences of boosting the lowest pay to $15 per hour. As with most things having to do with business, there are broad-based economic pros and cons to a minimum wage increase. Welcome to a Fresh Take on News | Unbiased & Fact-based news source. The bill has a slim chance of becoming law in the near future based on political gridlock in Washington. That means 36% of the U.S. workforce has freelanced this year, she notes for Forbes. Business Lines of Credit. The government can also use the resources and saved up amount in a better way and can make many other improvements. By raising the minimum wage to $15, the dependence on safety-net programs such as these can see a significant reduction in participation rates. Prior to the pandemic, about 3.8% of hourly workers between the ages 16 and 24 earned $7.25, compared to 1% of workers over the age of 25, according to the BLS. Biden's plan would shake things up entirely. Unable to afford a place of his own, he lives with his parents. In light of those struggles, some lawmakers feel now is not the time to raise operating costs for businesses. This disadvantage would happen because companies might restrict the quantity of new jobs they create when a higher minimum wage is mandated. Potentially, another advantage of increasing the minimum wage to $15 is a boost in economic growth as consumer spending will increase typically along with higher wages. That action forces employers into a costly cycle of turnover and training from which they might never escape. Tell that to the small businesses that are particularly vulnerable to cost increases, said Tiana Lowe in the Washington Examiner. Raising the minimum wage could even increase the overall cost of living for everyone because of this issue, creating a downward economic spiral where an even higher earnings level would be needed to help each household make their ends meet. Many prosperous states have already increased their state and local minimum wages to account for higher cost of living (DOL). Many employers are concerned about how increasing the minimum wage could have harmful effects on their businesses. "It doesnt reduce incentive for employer to hire, and it helps employees earn more.". Resources with the open lock icon are accessible for everyone. We're not making money; 2020 was a complete loss, Marshall said. The individuals who would be most at-risk for this choice are those who are either unable to qualify for college or want to work in a post that doesnt require a post-graduate degree. Working with a graphic or web designer on an as-needed basis, for example, may be less costly than paying a salaried employee plus benefits. Some go through the legal asylum or immigration application process to achieve this outcome, but many more do not. 7. The pros and cons of Ontario's proposed $15 minimum wage 1 phrase moms are 'sick of hearing' on, Mother's Daywhat to say instead: Parenting expert, 'Over-mentored and underfunded'the biggest, hearing called by the House Committee on Small Business, announced Tuesday by Senators Mitt Romney, R-Utah, and Tom Cotton, R-Ark, according to the Bureau of Labor Statistics, would increase wages for 17 million U.S. workers, report released Wednesday from the Economic Policy Institute, recent report from the Center for the Study of Child Care Employment. This advantage would strength African-American communities the most, where workers average about $700 weekly in median earnings. But the reality can be complicated, as shown by businesses that already pay above the minimum wage. The standard minimum wage for the rest of the state will rise to $14.20 from $13.50. They end up sacrificing a lot of day-to-day essentials because of the low income. All Rights Reserved. More money in the pockets of workers leads to increased consumer spending and positive economic growth(EPI). Raising the federal hourly minimum wage to $15 would reduce poverty - but would also cut employment by 1.4 million workers and increase the federal deficit by $54 billion over a decade . This minimum wage does not apply in New York City, Long Island or Westchester, which are $15 per hour. We review and interview both external and internal reputable sources for our content and disclose sourcing in our content. Reaction to the news was vehement and polar. Eliminating sub-minimum wage for Chicago's tipped workers is target of Raising the minimum wage to $15 provides every household with an opportunity to keep their finances rising at the pace of inflation at a minimum, which maintains their overall spending power. They will be forced to do so to cover the labor costs. In just 90 days after raising the minimum wage in New York City, over 4,000 full-time restaurant positions were cut from the economy. Job Losses, Business Closures. $15 Federal Minimum Wage? Advantages & Disadvantages - National Law Review When Alan Kruger and David Card analyzed a 1992 increase to the minimum wage in New Jersey for fast-food workers, comparing the results to neighboring Pennsylvania who didnt take such an action, the results were surprising. Washington, D.C. with its nation-leading minimum wage had an unemployment rate of 5.6% that same month. We thoroughly fact-check and review all content for accuracy. A Congressional Budget Office (CBO) nonpartisan analysis projected that raising the minimum wage may reduce employment by increasing amounts from 2021 to 2025. If the data goes to a minimum wage of $15 per hour, then the Economic Policy Institute estimates that a $5,100 increase in annual wage income would occur, providing families with extra resources that could help them to stop living from paycheck to paycheck. Here are the pros and cons of a $15 per hour federal minimum wage. That's the case for St. Paul, Minn.-based pizza chain Punch Pizza, which was acknowledged in former President Barack Obama's 2014 state of the union for paying its employees above minimum wage and currently pays an average of $13 per hour for starting wages. Minimum wage: $15 per hour brings benefits, consequences - CNBC Raising the minimum wage to $15 could reduce the gender wage gap. The following tips can help businesses accommodate navigate these additional expenses: Find innovative ways to pack on more value to help you secure repeat businesses. Raising pay could lead to better performance, higher customer satisfaction, increased morale and lower error and accident rates. 8. As of 2018, there are an estimated 1.8 million Americans (2.3% of the hourly workforce) earning at or below $7.25 per hour. Turn on desktop notifications for breaking stories about interest? There are intangible benefits as well which can result in huge tangible benefits. Business, marketing, and blogging these three words describe me the best. By raising the minimum wage to $15, there would be more money available in the economy. Raising the minimum wage to $15 provides every household with an opportunity to keep their finances rising at the pace of inflation at a minimum, which maintains their overall spending power. 1. The pros and cons of raising the minimum wage to $15 take a look at what the impact would be on society in general. Thereafter, it would be indexed to grow at the same rate as the U.S. median wage the point at which half earn more and half earn less. Increasing the minimum wage could encourage more business earnings across the country through a diverse set of different ownership efforts. However, the bill also mandates that employers use e-verify to ensure that businesses are not hiring illegal immigrants. It's true; many of the employees who are earning at or below the federal minimum wage of $7.25 per hour are younger. Our doors are barely open.. In 2011, the minimum wage reflected just 37% of what the average worker earned in the United States. The increase in prices of all the products and services means a general increase in the cost of living. This issue can restrict the number of openings which are available for workers who only have a GED or high school diploma, along with recent college graduates and workers who join the labor force again after an extended absence. Effective July 1, 2024, there will be a uniform minimum wage of $12.00 per hour for all employees. Yet by more than doubling the federal minimum wage over a few years, Biden's plan would enter uncharted territory. Over a quarter of those workers have children. 18 Crucial Pros and Cons of Raising Minimum Wage Employees receive whichever is higher, the federal, state or local minimum wage. LendingTree does not include all lenders, savings products, or loan options available in the marketplace. Raising the minimum wage to $15 per hour could further increase this issue, potentially taking jobs away from people who need them. The federal minimum wage in the United States is only $7.25 per hour. Advocates for the minimum wage increase believe it should keep pace with inflation so that people can afford to provide for themselves.