Labor Day Deep Dive: Minimum Wage

Robert Brooks Contributor
Labor Day Deep Dive: Minimum Wage
Read Time: approx. 4:01

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Labor Day Deep Dive: Minimum Wage: Well, it’s here. The unofficial end to summer is upon us. In some respects the past few months flew by in the blink of an eye and in others they felt like an eternity. Regardless, most Americans now get an extended weekend to celebrate Labor Day, or a “tribute to the contributions and achievements of American workers,” according to History. Labor Day traces its origins to the late 1800s, which was the fever pitch of the industrial revolution in the United States. On average, American workers clocked-in 12-hour-plus days, seven days a week to scrape together a basic living. Young children, sometimes as old as five or six, worked in factories and mines, and were paid less than their adult colleagues. As a result, labor unions became more powerful, holding strikes to protest the squalid conditions American workers faced on a daily basis. Ultimately, in an effort to end unrest and polish their image with workers, Congress passed an act making Labor Day a holiday in DC and the territories, which President Grover Cleveland signed into law on June 28, 1894. We’ve come a long way since then, but we’re still grappling with modern day labor issues. Take the gig economy for example. In 2018, a report found that “Uber and Lyft drivers in the US make a median profit of as little as $8.55 per hour before taxes, [which] suggests a majority of ride-share workers make below minimum wage and that some actually lose money.” Whether or not gig-workers should be treated as employees is a separate issue that we can certainly dive into later. For now, however, we’re going to take a look at one of the more hotly debated issues surrounding modern day labor disputes: minimum wage. Here’s what both sides and both presidential candidates are saying about the topic:

Supporters argue that raising the minimum wage would improve the overall standard of living for low-wage employees. According to a report from the Congressional Budget Office in 2019, if the minimum hourly wage was raised to $15 by 2025, an estimated 1.3 million people would be elevated above the poverty line. Not only would a minimum wage increase lift families out of poverty, it would also reduce the reliance of individuals on federal and state welfare systems that support poor and low-income members of our society. Supporters also argue that a wage boost would lead to higher morale, which would reduce employee turnover. Increased employee retention would lower hiring and training costs making our economy run much more efficiently. Last, but certainly not least, if low-wage workers had more money in their pockets it may also lead to a bump in consumer spending, filtering more money through the American economy as a whole. The saying goes, “a rising tide lifts all boats,” suggesting that extra discretionary dollars for millions of people would flow through and to other businesses. As MarketWatch points out, “A $15-an-hour federal minimum wage has long been on many Democratic lawmakers’ wish lists. They could have the chance to cross that goal off their lists come November” if Joe Biden wins the White House. On Joe Biden’s website, the former vice president says that if he is elected to office he will, “Increase the federal minimum wage to $15.” The Biden team says, “this increase would include workers who aren’t currently earning the minimum wage, like the farmworkers who grow our food and domestic workers who care for our aging and sick and for those with disabilities. As president, Biden will also support indexing the minimum wage to the median hourly wage so that low-wage workers’ wages keep up with those of middle income workers.”

Opponents of increasing the minimum wage argue that small businesses would be forced to pass along the cost of any wage bump to consumers. A broad increase in wages or salaries would significantly increase operating expenses. In order to pay for these additional operating expenses, both small and large businesses alike would be forced to raise the cost of their goods and services. This means that customers would be stuck with the bill, which could slow consumer spending, especially during a downturn like the one Main Street is experiencing right now as a result of the coronavirus. If prices for products increase, this would essentially negate any wage increases. Another potential problem that opponents point out is the projected job losses that could arise from a mandated minimum wage bump. So, for example, if the owner of a small business has two employees making $7.25 per hour, but the government says he or she now needs to pay them both $15 per hour, the owner simply might not be able to. This would force the owner to fire one of the employees. The same Congressional Budget Office report from 2019 pointed out that “raising the minimum wage to $15 an hour by 2025 would result in the loss of approximately 1.3 million jobs,” Investopedia notes. “The numbers could be substantially higher if companies made a major move toward outsourcing more jobs to less expensive labor markets outside the country.” Last but not least, another potential negative impact of an increase in minimum wage would be more competition for those low-paying jobs. This means that overqualified workers would take jobs from younger or inexperienced workers, which would then prevent up and coming members of our country from gaining experience. President Trump’s stance on minimum wage specifically has been mixed. During his 2016 presidential campaign, Trump at times advocated keeping the federal minimum at $7.25 an hour and other times said that was “too low.” The Trump administration believes that “efforts to reduce taxes, eliminate regulations and implement fair trade deals are driving economic growth and increasing workers’ take-home pay far more effectively and efficiently than legislation.”

Flag This: Currently, federal minimum wage is $7.25 per hour, but many states also have minimums. According to Investopedia, “as of February 2020, Georgia and Wyoming have the lowest state minimum wage requirements. At $5.15 per hour, each state has a minimum wage more than $2.00 below the federal mark of $7.25. Despite these low state-approved minimums, federal law supersedes, and dictates that the higher of either the state or federal minimum is legally applicable, which means that the enforceable minimum wage in both states is actually $7.25.” Conversely, Washington DC has one of the highest minimum wage requirements. On July 1, 2020 the minimum wage in the District of Columbia increased from $14.00 per hour to $15.00 per hour for all workers, regardless of the size of the employer.