Minimum wage: examining the options
The economy is not stable enough to handle minimum wage increase, recession in near future
Working at the minimum federal wage of $7.25 an hour for 40 hours a week results in $290 a week, without taxes. That’s $1,160 a month and $13,920 a year, again without taxes deducted.
Families USA reported the new 2014 federal poverty line for the 48 contiguous United States as $11,670 a year. So technically, one person working full-time at a minimum-wage job is above poverty level in the U.S.
But let’s face it, that’s cutting it awfully close. For a single parent with a child, it’s just not enough anymore — and apparently, members of Congress are finally beginning to see it, too.
Yet in spite of the legislative branch’s recent epiphany, the only thing worse than their government shutdown issues in the last six months is their timing.
Those employed under the federal minimum wage of $7.25, understandably, have the desire to raise that wage immediately, but with a large — and expensive — health care act still being worked out, now couldn’t be a worse time.
The Huffington Post showed CNBC’s Dan Mangan’s report in 2013 that expressed the startling finds by a Gallup poll commissioned by employment law firm Littler Mendelson.
It found that as a direct result of the Affordable Care Act, commonly known as Obamacare, nearly 41 percent of the businesses polled had frozen hiring completely, with one-fifth of those same businesses having reduced the number of employees they had as a “specific result of the Affordable Care Act.”
Businesses have already been hit hard with being forced to provide health care to their employees. Ethics aside, now that employers have to fork out extra to stay in compliance with the Affordable Care Act, they aren’t going to want to fork out even more to pay a new $10 minimum wage.
The arguments of what an employer should be required to provide for his or her employees is a heated one, including contraception — just look at the federal court decision in Chicago concerning Notre Dame’s health care and birth control — that hasn’t died down yet, and a lot of people aren’t under the new health care coverage rules.
CNN Money reported that the Congressional Budget Office estimates anywhere from 500,000 or fewer jobs lost to maybe just more than a million.
If it stays at 500,000 jobs lost, that’s only a “0.3 percent decrease in employment.” But that still hurts families, especially the members that are minimum-wage earners, who aren’t always just teenagers and the unskilled.
Last year, The Wall Street Journal reported about 284,000 Americans with college degrees were working minimum-wage jobs.
A report from the National Employment Law Project reported that three-fifths of the middle-income jobs lost were replaced with “low-wage work.” The job market has changed, making it difficult to look at since a lot of the open jobs are in the low paying sector — not to mention, it hurts more in a recession.
The Denver Post reported one of America’s foremost “privately-held economic research facilities,” the Institute for Trend Research, as predicting another recession this year. The company has had a well-developing reputation since 1948 for “making accurate calls on the business cycle.”
Therefore, ITR’s prediction for another recession in 2014 is nothing to scoff at and set aside with any printed-out articles of the latest grassy-knoll theory.
If that wasn’t enough, The Denver Post included ITR economist Alan Beaulieu’s thoughts on the effect of health care reform on the economy, including the recession as a result, saying that “the added costs associated with health-care reforms will cause employers to cut hours this year and next, reducing incomes.”
In the end, with the Affordable Care Act and a recession predicted for the near future, our economic instability is not something to bombard with further changes.
We need to work through each major change at a time, and when the time is right and our economy is more stable, we can up the minimum wage and really change some people’s lives.
Opinion columnist Rachel Lee is an English sophomore and may be reached at [email protected]
Increased minimum wage should be the decision of the business, not a national mandate
The hot topic that has politicians and economists buzzing is whether the federal government should raise minimum wage to $9 from $7.25 an hour. The last time minimum wage was raised was on July 24, 2009. At the 2014 State of the Union address, President Barack Obama said raising the minimum wage could be the step that could benefit millions of working families.
Obama’s message to help reduce poverty has been misconstrued. The decision to seek a raise in minimum wage comes with good intentions, but this may not reduce poverty in America.
For decades, many labor economists and business executives have held the view that forcing companies to increase pay will lead them to hire fewer employees. Sure, employees will get a higher wage, but companies might have to lay off another employee because of limited resources.
According to USA Today, Republicans are saying an increase in minimum wage could translate to a decrease of jobs. If the price of employment is raised, there will be fewer jobs to go around because all firms have to budget for the influx of current employees. Even then, economists are also split on whether the minimum wage should be raised.
“Raising minimum won’t kill jobs; it will kill job vacancies,” said Michael Reich, an economist at the University of California at Berkeley.
According the LA Times, the case against a higher minimum wage is that it makes it more expensive for firms to hire workers. In turn, the people who get to stay employed will earn more, while those who lose their jobs and fail to get new ones will suffer.
The general consensus seems to be that raising the minimum wage will hurt employment among teenagers and restaurant workers — the people whom the decision would impact the most.
Workers who earn minimum wage tend to be younger and largely unskilled. For these inexperienced workers, an increase would make it more difficult to find a job because these businesses would have to eliminate available openings or choose to hire someone more experienced.
Individual states have increased their minimum wage laws, and I think that’s a better response to fit each job market and the demand.
Companies such as Whole Foods, Costco or Gap Inc. — which also operates Old Navy, Banana Republic and Athleta — have raised their minimum pay to at least $10 per hour. It’s a decision that can be made because these companies can afford to.
Gap Inc. had discussed raising wages for a period of time, and the decision was unrelated to the nationwide minimum wage debate, said Old Navy vice president Lynn Albright.
These companies believe higher wages will be more profitable to them because it will minimize employee turnover and maximize employee productivity, commitment and loyalty, said Costco CEO Craig Jelinek.
This was a decision these companies made on their own and not because of federal law. If Obama wants to help the poor, I don’t think this could be an effective long-term solution.
Rather than increasing minimum wage, start by cutting back on the costly regulations that prevent job creators and limit the job market. The move toward a higher wage looks unlikely to progress and pass. The wage increase might bring 900,000 out of poverty but would in turn take away 500,000 jobs.
The minimum wage should not be increased — at least not until there’s a hike in the cost of living, which I don’t see happening for about another decade.
Opinion columnist Gemrick Curtom is a public relations junior and may be reached at [email protected]