Raising the Minimum Wage- An In-Depth Analysis

As of 2019, according to the US census, 34 million Americans live in poverty. When COVID-19 struck, that number increased. In January 2021, a $1.9-trillion COVID-19 relief bill was introduced in the House of Representatives. It included funds to safely reopen schools, the much-anticipated stimulus checks, and a federal wage increase from $7.25/hr to $15/hr. This last part didn’t make it into the final bill due to opposition from both Republicans and Democrats. This has been a highly-debated issue for a long time.

The minimum wage has not increased since 2009, and $7.25 is a starvation wage. I wrote this article after a discussion we had in my European history class. Dr. Jones usually lets us argue controversial issues, which makes it one of my favorite classes. The minimum wage argument had me thinking even after the class was over. I could see both sides. Nobody wants to vote on a bill that will cost jobs, and I saw myself being able to argue that side.

There are some people who believe that raising the minimum wage would lead to massive unemployment. The Congressional Budget Office (CBO) released a report which indicated that raising the wage would cut ~1.5 million jobs. As we’ve seen with the pandemic, unemployment has spiked, which was devastating.

The argument is valid. If you raise the minimum wage, businesses will have less money to go around, so some workers will have to be laid off. Nobody wants to support a bill which cuts jobs, but this theory is just that: a theory. There are many economists who believe this is not true, and that raising the wage would actually create jobs.

Arguments in favor of the increase

A video uploaded by The Economist on February 5, 2021, analyzed the minimum-wage debate. At around the 3-minute mark, the video brings up a study conducted in 1992 by two economists from Princeton to see how changes to the minimum wage would affect employment in fast-food restaurants. They compared two states, New Jersey and Pennsylvania; the former had an increased minimum wage, and the latter had no change in pay. What many people expected was to see unemployment grow in New Jersey in comparison to employment in Pennsylvania. What happened was exactly the opposite: employment in New Jersey actually increased. Why did it increase? Economists say it's because the higher wage attracted new workers to the market. This was the first study of its time to prove that raising the minimum wage doesn't necessarily destroy jobs. This study also led to “a new focus, on empirical, or real-world, data as opposed to theory,” says the video.

It is difficult to predict what will happen if the wage is raised in terms of unemployment. What we do know is that workers will be more productive, there will be less employee turnover, workers will be able to pay for housing and food, and living conditions for these workers’ families will also improve.

If economists are constantly disagreeing with each other, some saying jobs will be lost and others saying they won’t, what do we do? Do we keep the minimum wage the same, fearing the risk of unemployment, and allow more and more people to go into poverty? There has to be a point where the promise of the solution is greater than the risk. So what benefits does this solution provide?

Raising the minimum wage is essential for our workers. $7.25/hr is simply not a livable wage, meaning you cannot raise a family with that pay. Full-time workers who work 40 hours a week (around 8 hours a day) for 52 out of the 52 weeks in a year earn an annual income of ~$15,000. This is below the poverty line. A family of four in Utah needs about $67,277 in income before taxes, according to a 2019 article published by CNBC. Food costs alone make up $10,000 of your salary, and housing is another $10,000. The bottom line is, you cannot support a family with the current minimum wage. When you live below the poverty line, you have to make very tough choices.

What would happen as a result of this change? A $15 minimum wage would raise 1.3 million households out of poverty. Imagine people, not numbers. Imagine that 1,300,000 households would no longer be considered poor, and they could earn a livable wage with which they could afford housing and food costs.

I recently had a chance to speak with Senator Escamilla, a Democrat representing Utah’s first district in the State Congress. When I asked her about unemployment, she said that people being paid the minimum wage are forced to work a second and sometimes third job to put food on the table. This substantially decreases productivity, which in the end affects the businesses. If workers were paid $15/hr, they wouldn't have to rely on other jobs, and their productivity and overall mood would improve in the first job.

Contrary to the popular belief that low-wage workers are young students looking to pocket some extra cash, half of all Americans in low-wage jobs are actually essential workers, usually providing for their families. These include nursing assistants, home health aides, and people handling and distributing food. But what worth does the title “essential” have if these people are struggling, barely paying rent, living paycheck to paycheck? We praise these workers, we thank them, but when it comes to raising their wage, we turn on them and only award them the title of “essential.”

How do other people perceive the Raise the Wage Act? Eli Borgenicht, a sophomore, says, “the minimum wage needs to be raised because it’s been at an extremely low point for several years on end and it’s past overdue for a raise. It is important for workers to be paid a fair amount so they can provide for their families.” I couldn’t agree more. This is about families, not politics.

When asked about the risk of unemployment, Eli said, “I would vote to raise the minimum wage because like I’ve said many times, it’s well overdue. Although some jobs will be lost, we know that they can be gradually gained back. We’ve seen this with the COVID-19 pandemic how many jobs have been lost, but many of those are being gained back slowly and steadily.”

A first-world country should be able to pay its workers a fair wage. It's that simple. Like I said before, I continually saw myself arguing for both sides: higher wages for workers but no unemployment as a result. This, of course, is a difficult task. So what always kept me grounded on the idea of raising the wage is that children deserve a life where they can afford food, and school supplies, and a house. But families working for $7.25/hr sometimes can’t afford these things. Families are struggling, and if raising the minimum wage can bring 1.3 million households and 600,000 children out of poverty, raise the pay of more than 17 million workers, and provide a fair wage for essential workers, then I think we have a moral obligation to pass this plan. We must put people before politics.

Click here to read the full interview quotes.