What Happens If We Increase The Minimum Wage?

The recent dispute in Congress that the United States federal government should raise the minimum wage, which stands at $7.25 an hour and has not been raised since July 24, 2009 — during President Obama’s first term in office when the Democratic Party still had power in all branches of government. It’s worth noting that the vast majority of developed nations have implemented a minimum wage in some form, and most of those countries have implemented a higher minimum wage than the United States.

These countries include Australia, France, Germany, New Zealand, Netherlands, Belgium, the United Kingdom, Canada, Ireland, Korea, Spain, and Slovenia. Those with lower minimum wages include Poland, Israel, Turkey, Lithuania, Portugal, the Czech Republic, Greece, Hungary, Estonia, Latvia, Costa Rica, Slovak Republic, Chile, Colombia, the Russian Federation, Brazil, and Mexico.

It’s also worth noting that many service professions allow employers to pay less than minimum wage when they expect employees will be tipped to make the difference (legally the employer has to make up the difference if they are not). Any waiter pay graphic will showcase that many of these professions utilize a “tipping pool” to allow employers to reallocate another person’s pay to a person with a job that isn’t normally tipped — thereby allowing the employer to pay the second person less than minimum wage as well.

Economists have a fairly well-rounded understanding of what happens when the minimum wage is increased, which means people are free to form their own opinions of whether or not raising it is a good idea for a particular society.

For example, many people will argue against the minimum wage because raising it means that the cost of living will go up as well. What they rarely say is that the cost of living will go up even if you do not raise the minimum wage. Other impacts are easily defined: many workers would be lifted from poverty levels or not have to work more than one job, while others would find it more difficult to find work in the first place. Raising the minimum wage seems to be a balancing act, if nothing else, and our legislators have yet to get the balance just right.

Other opponents of raising the minimum wage believe that it will lead to inflation or make American companies less competitive here at home and in international markets. Job losses, they say, would result.

According to a report released by the Congressional Budget Office (CBO) in 2019, the standard of living would be raised for approximately 17 million people if the wages were raised to at least $15 an hour by 2025. Over a million of these people would be scooped up from poverty. Another benefit would be the reduced entitlement benefits required to be doled out by the United States government. Productivity might also rise with the wages, as workers are more likely to be happy and relaxed. Less stress experienced by employees has always translated well for businesses.