By Kirstyn Hill
February 23, 2021
With the current minimum wage standing at $7.25 since 2009 regardless of the impact of inflation, it is about time Americans are due for a wage increase. With wealth inequality at an all-time high and the COVID-19 pandemic rapidly destabilizing the financial security of Americans nationwide, the need to raise the minimum wage is increasing. President Joe Biden’s 1.9 trillion dollars “economic rescue” package calls for gradually increasing the hourly wage in increments until it hits $15 in 2025. Additionally, it would be designed so the minimum wage is indexed to median wage growth, a move meant to guarantee wages keep up with inflation without needing new legislation.
It is believed that by gradually raising the minimum wage, incomes can keep pace with the increasing cost of living as well as, potentially lift millions of Americans out of poverty. A 2019 Congressional Budget Office (CBO) report projected a significant improvement in the standard of living for at least 17 million people, assuming a minimum hourly wage of $15 by 2025, including an estimated 900,000 million people being elevated above the poverty line. An additional benefit from lifting so many people from poverty would be the projected reduction in federal and state government subsidies and expenditures for low-income individuals. The Economic Policy Institute found that increasing the federal minimum wage to $15/hour and eliminating the tipped minimum wage by 2025 would free up $13 billion to $30 billion in taxpayer revenue annually.
The downsides to raising the minimum wage are not to go unrecognized regardless of the potential advantages. Opponents argue raising the minimum wage could fuel inflation due to the probable consequence of businesses increasing their prices. By increasing the price of general goods, the cost of living increases, potentially negating any advantage to wage increase. The other projected problem is job loss among Americans. The 2019 CBO report estimates that raising the minimum wage to $15 an hour by 2025 would result in the loss of approximately 1.4 million jobs. Additionally, it is argued that by raising the minimum wage, Americans incentive to strive for better opportunities may be diminished through the ability to maintain a comfortable lifestyle off of an entry-level position.
Raising the minimum wage in the US from $7.25 to $15 over the next four years does not come without its potential negative outcomes. Regardless, raising the minimum wage and allowing it to be coordinated with current inflation is a policy that many lawmakers are set on passing. IN the U.S. from 1978 through 2015, they found that a 10% increase in minimum wage only accounts for around a 0.36% increase in prices, which somewhat disproves the fact that wage increase will have any huge impact on the price increase. However other downsides of raising the minimum wage do not go unnoticed, but the overall current consensus is that this could be the economic rescue the US needs following the pandemic.