President Barack Obama demands there is a need for an increase in minimum wage so workers have a chance to support themselves and their families if needed. He would like to raise the existing minimum wage of $7.35 to a whopping $10.10 per hour! This sounds very exciting to young inexperienced workers receiving minimum wage, but is it the best for the economy?
Obama believes that by increasing wages that workers will become more productive and have more money in their pockets. They will then turn around and support these businesses by buying their products. He believes the money will circulate around while improving the poverty in the United States.
“The federal minimum wage amount should raise proportionally with the country’s inflation rate,” states Jonathan Wildhaber. If the rate did increase with inflation the minimum wage would only raise slightly not causing a shockwave to hit the country. This would also reward people that hold jobs and increase the incentive to work for a living.
Unfortunately, raising the minimum wage would challenge small business owners with minimal employees. This increase would be detrimental to them and in turn they would not hire as many workers. Overall this decreases the amount of possible jobs causing the unemployment rate to increase.
While the productivity has increased for a few businesses that have tried the wage increase this doesn’t prove very much on a national scale. The employees work harder because they feel obligated to since they make more than other minimum wage workers, but if the minimum wage increases on a national scale the complacency will return.
A wage increase will ultimately lead to a higher inflation. A dollar won’t mean as much since everyone has more than they used to. Prices will increase to keep up with the amount of money businesses are distributing to workers. Jared Allen imparts, “A minimum wage increase may seem like a quick solution, but it is really an oversimplification to a complex economic problem.”
Economics is a very slow process that can take decades to prove whether changes were better for the economy. Repercussions may not take place immediately but will ultimately reveal the consequences. While the need for an increased wage may be present it cannot bear to be raised $2.75 without negatively effecting the economy.
The Crusader Raid, Vol. 6, Num. 4.
The Spring/Summer Issue
Written by Jared Rackers