The federal minimum wage—currently sitting at $7.25 an hour—hasn’t moved a penny since 2009, but now President Joe Biden wants to increase it to $15 an hour. To some, this may seem drastic, but it really shouldn’t surprise anyone.
The idea of increasing the federal minimum wage is nothing new. Biden’s predecessors tried grappling with it as well—Barack Obama called for an increase to $10.10 in his 2014 State of the Union Address, and Donald Trump didn’t actively do anything, but he expressed both his support and opposition towards the issue—yet nothing has been done since 2009.
According to the U.S. Department of Labor, this has been the longest period without an increase in federal minimum wage since it was enacted in 1938.
In retrospect, making $15 an hour sounds great; so, why hasn’t Congress passed anything? Well, when you look at the bigger picture, it could ultimately cause a lot more harm than good.
If that’s the case, then why would President Biden even propose an increase in the federal minimum wage?
For starters, $7.25 an hour does not provide a substantial salary to live off of.
Americans making $7.25 an hour for a 40 hour work week are making approximately $290 per week and $15,080 per year and that’s before taxes without taking a single holiday or weekend off. The fact is $15,080 per year is just not a substantial salary to live off of, for anyone, especially a multi-person household.
If the federal minimum wage were to increase to $15 an hour, Americans—under the same circumstances—would be making $600 per week and $31,200 per year, a more reasonable salary to live off of.
As reported on Britannica, supporters of increasing the federal minimum wage argue that it would also spur economic growth, reduce poverty, reduce government welfare spending, boost productivity and promote education and self-improvement.
After looking at all the pros of increasing the federal minimum wage, I’m thinking, “Great! Sign me up because I’m done making $7.25 an hour.”
Then again, I might be getting a little too happy. Let’s put that positive mentality aside and really look at the cons to increasing the federal minimum wage.
According to the same source, aggravators argue that it would increase labor costs, outsourcing, unemployment, poverty and the cost of living.
The biggest argument against increasing the federal minimum wage is that it would cause inflation and force small businesses to lay off a number of their employees just to stay afloat.
A 2013 “Chicago Fed Letter” periodical published by the Federal Reserve Bank of Chicago stated that companies would pass 100% of the increased labor costs on to consumers, which would increase the prices of goods and therefore, the cost of living.
At that point you have to ask yourself, “what’s even the point of increasing the federal minimum wage if everything else increases as well?”
If the federal minimum wage only increases slightly—about 5-15%—supporters, according to Investopedia, believe that there would only be a minimal effect in prices. They argue that when the federal minimum wage previously increased inflation did not happen; therefore, it wouldn’t happen this time either.
What supporters aren’t calculating into this equation is the ever looming debt of the pandemic and the numerous stimulus checks already issued to support Americans. Raising the federal minimum wage would have an effect on the already downward spiraling economy. According to multiple sources, some even go as far to say it could cause another recession.
The Iowa State University Department of Economics conducted a study on this possibility, where they outlined the effect an increase in federal minimum wage would have on the job market. Ultimately proving that it could have a negative effect.
That might be rash, but according to Investopedia, supporters do agree that an “extreme shift” in the federal minimum wage could cause inflation.
President Biden plans to gradually increase the federal minimum over the span of 4 years, but would an almost 50% increase fall under this category of an “extreme shift?” If so, then should we be worrying about inflation in our future?
Needless to say, there are substantial arguments on both sides of the spectrum, but the power to make anything happen falls on the federal government.
As a college student, this debate might seem insignificant because we can’t do anything about it. However, the federal minimum wage would greatly affect Pennsylvania residents because it would overrule our state minimum wage of $7.25 an hour.
Now that former President Donald Trump’s impeachment trial is over, NPR reported that President Biden is hoping Congress will approve his $1.9 trillion COVID-19 relief proposal. Among other things, the COVID-19 package includes an increase in federal minimum wage to $15 an hour by 2025. If this part of the proposal does not pass, the Chicago Tribune reported that Biden plans to re-introduce it later as a separate bill.
I know it’s easy to just say, “let’s make a change, I want more money,” but it’s also important to look at the facts. Whether you’re a small business owner, poor college student or possibly a financially stable individual, think about how this would affect you and those around you, and then you can make a decision on whether you support the increase or not.