Is Raising the Minimum Wage Good or Bad for Business?

The era of expendable workers is gone and will not return. When it comes to minimum wage, our record low unemployment has motivated many corporations to raise their own thresholds. Amazon raised their minimum rate to $15/hr in 2018, Target is $13/hr. In 2020, many states will begin raising their minimum hourly rates to eventually get to the $15/hr threshold. Good pay remains to be the number one driver when attracting/retaining today’s top talent.

At this time, there doesn’t appear to be a plan to raise the federal minimum wage. The federal minimum wage has remained the same for the past 10 years, the longest period of time without an increase since the Roosevelt administration put it into place in 1938. Conceptually, raising the minimum wage will result in increases for businesses in the cost of labor resulting in higher prices which ultimately negates the impact of the wage increase. Some argue that higher hourly wages lead to less crime. The transfer of income from higher earners who have a higher tendency to save to lower income workers who tend to save less and spend more actually can lead to increases in demand/goods/services.

Research suggests that the minimum wage has little or no effect on poverty in the US. There are a variety of negative effects for lower skilled workers including less hours, reductions in other benefits, and some companies may actually cut jobs to make up for their increased labor costs.

Does minimum wage increase the standard of living for workers or will employers be forced to make cuts to their workforce?

Will employers cut other benefits to save on costs? The economy is changing. Many more people nowadays are employed on a "gig" basis which are more expendable. Uber, Grubhub, and others have disrupted the economy in a major way. Employment numbers are also artificially inflated companies eliminating full time positions and replacing them with multiple part-time positions. These moves again being more expendable.

Once these minimum wage increases take effect, will the costs of goods/services increase to negate the effect? Will low wage workers at least feel the positive impact for years until the cost of living catches up with the new threshold on earnings?

Is the federal minimum wage now irrelevant? Here in PA, if we saw an increase to $15/hr, I feel like that would have a HUGE positive impact to many in our communities. There would however be negative impacts too. Would the positive outweigh the negative? Will these states see their communities turn into high cost environments such as Seattle and San Francisco?

While it will be a boost to many who need it, it would still be strange for me to see my 16 and 17 year old kids making $15/hr at their first part-time jobs. It also nullifies those that have worked hard to achieve pay raises over the years. I remember when I first started out, was making $3.65/hour at my first job, the federal minimum wage was raised to $4.25/hour. That is what the senior employees, assistant managers were making, and they were furious that now we were at the same level. Employers will not be forced to increase wages for all, but it will create some tough situations when the pay differentials are not going to be what they are now for certain positions.

Will these required increases in certain states deliver the positive outcomes to the families that need it or will the unintended negative consequences outweigh the positive intent?