Minimum Wage, Labor Law

In a previous post, we discussed the potential need for an increase in the federal minimum wage. The issue is far from resolved, but there is one aspect that we did not really touch on in the previous blog.

That topic revolves around whether an increase in the federal minimum wage would remove jobs to compensate for the increased wages.

The reason many employers are opposed to the proposal for a federal minimum wage increase is because they feel that such a wage increase would hit them hard in their wallet. This would then make it harder for them to maintain the same number of employees that they currently have on payroll. This means that employers may feel a need to pass along this increased cost to the consumer in order to maintain the same level of profits, or alternatively, layoff employees to offset the increase.

While these options do not seem to directly correlate and appear to be excuses business owners and employers are making to dodge the real issue (greed and a lack of human decency), the reality may be that these employers have the right idea.

If we were to crunch the numbers, would the productivity increase hypothetically provided by workers being paid more of a living wage counter the sheer dollars-factor that the wage increase takes out of the company’s checkbook?

Analysts appear to be divided right down the middle. Some say that the federal minimum wage increase would benefit every aspect of the economy. They consider it a chain reaction of benefits.

The employees would be more comfortable in their employment, and their productivity would therefore increase.

Consumers would be more willing to purchase goods and services from companies that provide a healthy living wage to their employees.

Employers and business owners would see increased revenues which would more than compensate for the increased wage payments.

Other analysts say the sheer numbers of the situation do not lie. To pay more money to their employees, the business must find the money somewhere. That can either be from laying off some workers to pay increased wages to the remainder, or from passing on the costs to the consumer by raising the price of goods and services while maintaining the number of employees.

Which of the two sides is right? It all depends on who you ask.

For the so-called “working poor,” they are all but begging for the relief a minimum wage increase would provide them. In a nation where a third of the minimum wages workers currently employed are over the age of 34 and breadwinners for their families, making ends meet is nearly impossible without an extra job or two or government assistance. With a minimum wage that has little to no buying power in the modern economy, there seems to be only one viable solution, and that is by raising the minimum wage to an appropriate level, one way or the other.