Possible Minimum Wage Hike: Better Than Nothing

President Obama has thrown his weight behind a proposal to increase the minimum wage to $9 an hour, from the current $7.25. (When he was originally running for President, Obama actually called for an increase to $9.50.) Obama also supports tying the minimum wage to inflation.

While New York State discussed making an increase of its own last year, this federal boost would take effect nationwide.

According to a Huffington Post poll, 62% of Americans approve of the proposal. Paul Krugman breaks down the rationale behind a minimum wage increase for the New York Times:

First of all, the current level of the minimum wage is very low by any reasonable standard. For about four decades, increases in the minimum wage have consistently fallen behind inflation, so that in real terms the minimum wage is substantially lower than it was in the 1960s. Meanwhile, worker productivity has doubled. Isn’t it time for a raise?

A common criticism of increasing the minimum wage is that it will force businesses to spend more money on payroll; therefore, some businesses will have to fire employees. Krugman addresses this:

Now, you might argue that even if the current minimum wage seems low, raising it would cost jobs. But there’s evidence on that question — lots and lots of evidence, because the minimum wage is one of the most studied issues in all of economics. U.S. experience, it turns out, offers many “natural experiments” here, in which one state raises its minimum wage while others do not. And while there are dissenters, as there always are, the great preponderance of the evidence from these natural experiments points to little if any negative effect of minimum wage increases on employment.

Why is this true? That’s a subject of continuing research, but one theme in all the explanations is that workers aren’t bushels of wheat or even Manhattan apartments; they’re human beings, and the human relationships involved in hiring and firing are inevitably more complex than markets for mere commodities. And one byproduct of this human complexity seems to be that modest increases in wages for the least-paid don’t necessarily reduce the number of jobs.

What this means, in turn, is that the main effect of a rise in minimum wages is a rise in the incomes of hard-working but low-paid Americans — which is, of course, what we’re trying to accomplish.

The Huffington Post summarized the recent history of the minimum wage and called for action:

The last time Congress passed a minimum wage increase was more than five years ago. Since then, more than a dozen states across the country have successfully increased the minimum wage in their state. It is well past the time for Congress to raise the federal minimum wage to ensure working families don’t have to live in poverty, and can help contribute to the economic recovery.

The same article also reported Obama’s additional desire to shore up American workers in the form of protecting female employees:

In his [State of the Union] speech, President Obama also lent his support to the Paycheck Fairness Act, critical legislation that aims to fix the wage gap between women and men doing the same jobs. This type of economic inequality costs women and their families dearly in today’s economy: women make up 59 percent of the low-wage workforce and nearly two-thirds of those workers earning minimum wages.

See another good op-ed in support of the measure here, at MSNBC.

In addition to a low minimum wage, workers have to put up with their bosses. Many employees are unaware of the protections they enjoy under the law. This reality helps employers get away with underpaying their workers, often illegally. Contact The Harman Firm today if you have any questions about employment law.