By Allison Brito

Why Raising The Minimum Wage Is Beneficial For Individuals And Businesses

February 14, 2013 3:45 pm Category: Memo Pad 12 Comments A+ / A-

In Tuesday’s State of the Union speech, President Obama called on members of Congress to raise the federal minimum wage from $7.25 to $9.00 an hour, something Governor Mitt Romney (R-MA) supported during the 2012 election. The president said, “This single step would raise the incomes of millions of working families.  It could mean the difference between groceries or the food bank; rent or eviction; scraping by or finally getting ahead.”

Who could argue with that?

Two Republican leaders have voiced their opposition to the president’s proposal. House Speaker John Boehner (R-OH) and Senator Marco Rubio (R-FL) agree that raising the minimum wage hurts businesses, claiming that increasing the cost of employment makes it difficult for businesses to sustain themselves and deters them from hiring employees.

A study released yesterday by the Center for Economic and Policy Research suggests otherwise. John Schmitt, who authored Why Does The Minimum Wage Have No Discernible Effect on Employment?, argues that raising wages actually has little to no effect on employment. Schmitt offers 11 “channels of adjustment,” ways in which businesses could respond to a raise in minimum wage. These include raising prices on goods and services (offset by higher demand), increase in worker efficiency and effort, and less difficulty in recruiting and retaining employees which “may compensate some or all of the increased wage costs, allowing employers to maintain employment levels.”

Based on the results of this study, small businesses have everything to gain in paying their employees a wage they can live on. Economist and New York Times columnist Paul Krugman addressed the myth behind cutting minimum wage during a time of recession back in 2009. “In reality, reducing wages would at best do nothing for employment; more likely it would actually be contractionary,” Krugman said. “Proposing wage cuts as a solution to unemployment is a totally counterproductive idea.”

Larger corporations such as Walmart and McDonald’s that employ 66% of low-wage workers are rewarding their top executives in profitable years with raises, while their low-wage employees are still making minimum wage — a pay level that is not sustainable for many American families. In fact, if minimum wage matched inflation, it would be $10.58 per hour.

As stated in a Huffington Post article, “This would guarantee that workers on the lowest rung of the economic ladder don’t lose purchasing power, but it would also mean fast-food companies and other low-wage employers would have to pay higher wages just about every year, except in rare cases of deflation.”

This type of proposal was already favored in 2010, when the Public Religion Research Institute conducted a poll and found that 67 percent of respondents were in favor of increasing the minimum wage to $10.00 an hour—that includes a majority of respondents who identified as Republicans.

In 2007, President Bush signed the Fair Minimum Wage Act, which easily passed in the House 315-116, including bipartisan support from 82 Republicans. It passed the Senate — with the help of Mitch McConnell (R-KY) — by a 94-3 vote before making it to the president’s desk.

Studies clearly point to the profitable effects on individuals and businesses if earnings per hour are raised to a level where low-wage workers are actually able to support themselves and their families. If Republicans like Boehner and Rubio are truly advocating for their middle-class constituents, then supporting the president in ensuring that workers earn what they deserve — and can live on — ought to be a nonpartisan no-brainer.

Official White House Photo/Chuck Kennedy

Why Raising The Minimum Wage Is Beneficial For Individuals And Businesses Reviewed by on . In Tuesday’s State of the Union speech, President Obama called on members of Congress to raise the federal minimum wage from $7.25 to $9.00 an hour, something G In Tuesday’s State of the Union speech, President Obama called on members of Congress to raise the federal minimum wage from $7.25 to $9.00 an hour, something G Rating:

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  • http://www.facebook.com/dominick.vila.1 Dominick Vila

    Besides the obvious need to reward and encourage hard work, and mitigate social injustices, is the fact that happy workers contribute to innovation, quality and process improvements, and customer satisfaction. The last thing a corporation needs is a disgruntled workforce. Interestingly, the people that object to better remuneration for those at the bottom of our earnings scale, are the same ones that claim that 47% of our population depend on handouts to survive!
    The current minimum wage is a national embarrassment. Why is it that most industrialized countries can afford to pay livable wages to their employees, and suggesting the same in the USA quickly becomes an example of evil socialism and the end of American competitiveness? Why is it that Scandinavian countries, the Netherlands and Germany can afford to pay livable wages, remain competitive, and we can’t? Could it be that what is affecting our ability to compete includes the astronomical compensation given to CEOs, directors and other executives, the high expectations of American shareholders, and a focus on short term gain rather than what an assembly line worker or a sales associate earns?

  • dtgraham

    The minimum is starting to get a little ridiculous. Even if raised to $9.00 per hour it would still be behind several countries either when calculated as a percentage of the nation’s median wage or when adjusted for currencies’ different levels of purchasing power, according to data from the international labour organization and OECD, respectively. And that’s at $9.00 per hour.

    This is almost getting to be a matter more of growth and GDP rather than egalitarianism. This recovery doesn’t have the wealth drivers of past economies, when upward distribution really began to take off in the 80′s. You had Greenspan and the Fed lowering interest rates, and the way it ended up boosting the economy was boosting asset prices—the stock bubble in the 90′s and the housing bubble last decade which led to this wealth effect on consumption.

    The story of this recovery so far is both a continuation and discontinuity of those trends. Income inequality and record corporate profits are still there but there’s no replacement asset bubble this time. There’s nothing like the tech boom….nothing like housing. Therefore a solid boost in the minimum would do wonders for consumption and economic growth and it costs taxpayers nothing.

    If banks are still more interested in the credit default swap market than vanilla business loans and if corporations aren’t investing, then savings and retained earnings won’t do the job, and aren’t. A boost in consumption is one avenue of growth.

  • m8lsem

    As noted it would be less than the inflation-adjusted figure for earlier minimum wage, and if go back earlier to 1958, let’s say, I’ll bet the present minimum is WAY-BELOW inflation adjusted from then.

  • latebloomingrandma

    I heard one Congressman against the increase in minimum wage state that minimum wage jobs are held by teenagers, presumably meaning that we don’t need to worry about them, these are just temporary jobs. Not so. I met a couple at a free medical clinic, where the wife worked at subway and the husband was an aide in a small personal care home, taking care of Alzheimers patients. They could not afford health care, and had to rely on food stamps. Both jobs were minimum wage. Very typical in my area of PA. I don’t think the Romneys of the country have any clue at all about the “working poor.”

  • m8lsem

    Image the poor Wall family, having to reduce their own multi-million dollar incomes by possibly 20% in order to give raises to the grunts who work part-time (no benefits) in their vast empire. If worst came to worst, raise the price of every item sold by 5¢, except if costing over $10.00 by 25¢, and they’d be swimming in dollars to give the workers.

  • http://profile.yahoo.com/NHMIKZTR3BNQFYEIAZIJWMYUIU noveleur4

    Raising the minimum wage would probably wage prices. When the minimum wage was under $5, a McDonalds value meal used to cost about $5. Now it costs about $7 since the minimum wage is $7.25. Do you want to pay $10 dollar for a McDonalds value meal. I sure don’t. If this happens, people making minimum wage will be no better off since prices of basics such as food will rise. People making $10 to $12 an hour will be worse off since their wages will NOT increase and they will have to pay more for the same stuff.
    Minimum wage jobs are not meant for heads of household. Only three types of people should be working for minimum wage.
    1) students who are just gaining their first work experience and supported by their parents
    2) the disabled who also get a social security check
    3) housewives or househousehusbands whose spouse pays the rent or mortgage and they just need a little spending money.
    If you are a head of household and making minimum wage, you should get a better job. It’s not that hard and you don’t need a 4 year university to do it. A 1 year or less program at DeVry or ITT Tech can put you over $10 an hour in earning power.
    A raise in minimum wage sounds nice on the outside but will make everyone worse off when said and done.

    • charleo1

      Who knew the cost of a Happy Meal, was tied directly to the wages of the people preparing
      it? If so, what logic explains the rising costs of healthcare, housing, gasoline, or groceries,
      continuing to occur, minus an increase in the minimum wage? So, something other than wages must driving the higher prices. Or, conversely we might deduce under the theory that low wages cut overhead, and therefore reduce prices, and increase economic activity. Then,
      it should follow, the reason the economy remains lackluster, is because there are still too many people, making too much money. So employers, even though they need the help,
      just can’t afford to hire more people, with the exorbitant salaries being demanded.
      Does that sound like the economy you are looking at today?

    • sigrid28

      Following this logic, may we assume that raising the wages of non-minimum wage earners would also fail to stimulate the economy? Would it be a better policy to reduce the salaries of CEOs making 200% more than they did years–not decades–ago? I thought increasing the income of wage earners was supposed to stimulate the economy? Now, you argue that raising income does not do that?

  • charleo1

    The minimum wage needs to be increased. The structural problem in the economy that is
    responsible for the vast majority of our financial problems can be traced to the reality, that
    we have far too many people working for a wage that simply cannot cover their expenses for
    existing on this planet. Time, and again we hear from the Right, that the top 2% pay 40%
    of the taxes, while the bottom 50% pay nothing at all. Both asking, and convicting those
    who argue the point as a human Rights issue, as well as an economic one, as being divisive.
    Or envious, and seeking to punish the successful. Which is then characterized as enabling
    and growing an under class, with poor work ethics, that are essentially exploiting the wealthy,
    and industrious. When, in actuality, the working class has not realized an increase in disposable
    income, since the mid 1970s. While the salaries of management increased from 70% of the
    pay of the rank, and file, in that 70s, time frame. To an average of 300% in the last decade.
    This at a time, when the productivity of American labor has increased 200%, since the 70s.
    A good read, is Dylan Ratigan’s “Greedy Bastards.” Or insightfully brilliant, and devastatingly
    enlightening, articles by Senator Elizabeth Warren, outlining the hollowing out of America’s
    Middle Class. And just as important as wages, are the tools of upward mobility, where the poor
    can clime to the Middle Class, and the Middle Class to comfort, has been greatly reduced.
    More than anytime since the turn of the 20th century, a person born into poverty will likely
    stay impoverished for the rest of their lives. And for the first time since the end of WWII, many
    Americans cannot reasonably expect that their children will be better off in their lifetime,
    than they were in theirs. And, since that’s so. How can we reasonably expect America to be
    better off, more secure, and be an advocate for our ideals of freedom, liberty , and human Rights?
    The short answer is we can’t. How can we reasonably expect to deal with the deficits, and debt,
    if we refuse to correct the imbalances in our economy, that is the underlying cause of our debt?
    What would be our reaction if we received a letter from our local Wal-mart, explaining that
    while we all like the low, low prices we’ve come to expect. The Walton family feels that since
    they already pay a lot in taxes, and the wages they pay the 40 part time employees, to provide
    the low, low, prices, Wal-Mart thinks it only fair that you send $10. for each of it’s workers
    to help offset the healthcare, and other community services, they will likely be using, but can’t
    possibly pay for. So, how about it? Send them the check? Or suggest they pay their employees
    a decent wage, so you won’t have to subsidize the people working for them. What do you think
    you are paying for, as a part of your property tax bill, or your state, or Federal income taxes?

  • bchrista

    In Boehner case I know why he’s for keeping the minimum at the rate it is now because he’s Anti-Union and he and his Republican buddies can pocket more money if they keep the minimum wage down, however, Rubio is a horse of a different color, with Cubans they don’t believe in the lower class ever getting ahead. I will tell you a short story, I worked for a Cuban construction company many years ago when I was living in Miami, I’m going back to the 1980′s, they were looking for a layout man so I applied and got the job the first thing I learned was that they didn’t pay their laborers and carpenter the standard wages at that time Union Carpenters were getting around $ 10.00-12.00 dollars an hour and laborers $6.00 dollars an hour, however Cuban construction companies paid their carpenters the top man $3.50 an hour and their laborers $1.75 they were able to do this because these people had not been here very long and they could’nt speak English, you see Cubans are very clanish they stay in one area, Barios they call them and since most of them weren’t used to earning that much money they were satisfied to earn that much on the other hand they paid me Union wages, but they were smart they put a Panamanim to help me layout and to learn from me how to do it when they felt he could read the plans good enough well they didn’t me anymore so down the road I went, well Marco Rubio is cut from the same mold he still has the same mentally and unless your are on the same level as he is then you must be the lower class, you see Cuba was always like India only two classes of people lived there the well to do and the have not and even though he was raised in the United States he still thinks like a Cuban, I bet that Cubans in Miami for the most part still earn below the poverty level, He claims that he still lives in the same neighbor hood he was raised up in but what he’s not saying is that he’s been trying to sell that house so he can go to DC and live, the reason the house isn’t selling is because he’s asking about five times what the house is worth in that neighbor hood (650,000) I would hate to think of what our country would be like under a Marco Rubio Presidency he belongs in that bunch, he’s another lying Republican Teaparty asshole

    • Dmullins84

      bchrista, I seen a similar situation as you experienced in England while stationed in the Air Force there in the early sixties where the local Bloaks as they called themselves work for 5-8 pounds per week. At that time the ratio of pounds to dollars were approximately $2.80 per pound. These people knew nothing else and appeared to be happy. Of course there’s a difference since their economy was structured around those small wages. At that time they had free Health care, and the Doctor came to their home when needed. Housing and food was also structured around cheap wages. Car’s and Gas was another story. At my base I could get an imperal gallon of gas for .18-22 cents per gallon On their economy that same gallon of gas was going for .90 cents per gallon.

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