'Economic (and Social) Impact of Minimum Wage Increase'

As the debate over the implications of the minimum wage increase continue, the effect of the minimum wage increase on the economy and therefore society become just as varied.

In terms of the impact towards the economy, there is just as much disapproval as approval towards the minimum wage increase. It has been reported that over six hundred economists have signed a letter in support of the $10.10 minimum wage. They believe that this wage increase is a much-needed stimulant to boost the earnings of low wage workers especially in times of high unemployment rates. In other words, they believe setting a standard wage, even one that is almost thirty six percent higher than the current minimum wage is necessary. Similarly, calls for minimum wage increase are based on the idea that the economic well-being of low-paid workers will become better and the hope of the movement in policy making to combat poverty. Meanwhile, those against the measures argue of the possible increase in unemployment or the lack of job openings. The low-paid workers who need the jobs paying the current minimum wage will become unemployed. To increase the minimum wage is to only increase the burdens of small business owners who are already struggling in the current economy. To increase the minimum wage is to create inflation and further contribute to a dysfunctional economy.

And yet contrary to the answers of both sides of the argument, it has been argued that this minimum wage increase will, in fact, not have much of an effect on the economy. Even though these jobs may be lost, the economy could still be healthy. According to Michael Reich, a professor of economics at UC Berkeley with a focus on labor economics, high wages will push employees to remain in their current positions and companies would not have to handle the costs of hiring and training replacements.

In other words, the work force would be filled with more competent workers who in turn, could help the efficiency of businesses and the number of employees quitting also decrease. Similarly, the raising of prices due to more expensive labor costs would not cause a noticeable difference in terms of inflation.

According to Reiche, “Restaurant prices increase on a one-time basis of about 0.7 percent for each 10 percent increase in the minimum wage — not enough to affect sales,” Reich says. “Prices do not increase by detectible amounts in any other sectors.” Therefore, more than there being more unemployment, the

percentage of unemployment would just be more consistent. The belief that the minimum wage increase would kill jobs is also based on uncertainty and not entirely supported by evidence.

Even though the Congressional Budget Office (CBO) released a report that estimated the $10.10 minimum wage would kill 500,000 jobs, this estimate is but an average. The report further describes how the net job loss could be anywhere from zero to 1 million based on past research and studies of state-level minimum wage raises which were also inconsistent. In some cases the raises worked and in others, the raises did not.

Likewise, the minimum wage increase does not have solid evidence that it will greatly improve the economic standing of low-wage workers nor much of an impact on removing poverty. Along with the estimation of 500,000 jobs lost, the CBO report projected that about 900,000 people (or roughly 300,000

households) would be lifted out of poverty with the new minimum wage. However, this number is less than 2% of the number of Americans who are currently living in poverty.

If it is clear that the minimum wage increase would not have a great impact on the economic or social situation of America, the debate about the minimum wage increase should not be sustained.

However, everything is a matter of personal belief. One’s approval or disapproval of the minimum wage increase is but a reflection of his or her beliefs of what the economy and therefore, society should look like. Therefore, the minimum wage increase, rather than being a cure-all to poverty or the beginning of a

plummeting economy, is a step towards what people believe is the start to the equalization of social classes. The social debate surrounding the minimum wage increase follows the attitude similar to that of the Occupy movement and the protests against Wall Street. It is a continuation of the fight between the haves and have-nots, the 1% against the rest of America.