6 Reasons Why We Should Raise the Minimum Wage
The federal minimum wage has been an underwhelming $7.25 an hour since 2009 –– which is the longest the rate has gone without an increase since its inception in 1938. Since then, inflation has continued increasing, while the minimum wage has stayed stagnant.
Congress remains deadlocked on the issue, despite the fact that 67% of Americans are in favor of raising the minimum wage to $15 an hour. While economists have found conflicting results when studying its effects in Seattle — the first city to pass an ordinance — the benefits are worth the risks. Here are six reasons why raising the minimum wage is long overdue.
1. $7.25 is not a livable wage
$7.25 an hour translates to $15,080 a year. The federal poverty line for a family of one is $12,760 a year. So even without a partner or kids, people are barely living above the poverty line. What is the minimum wage supposed to cover? Housing? Insurance? Or just enough to put food on the table? The minimum wage does not allow families to achieve true financial stability.
A few facts for your reference:
- $7.25 an hour only translates to $15,080 a year if a person is able to work 40 hours a week, 52 weeks a year.
- There are 82.3 million workers in the U.S. who are paid hourly, of which 392,000 earn minimum wage.
“The average rent in the United States is $1,216 a month. That’s for a one-bedroom apartment. In most major cities, that’s not enough to pay the rent on a one-bedroom apartment. Even if you live in a three-bedroom house and split the rent, you’re likely having a tough time keeping up,” says Jack Choros, CMO of SophisticatedInvestor.
2. The majority of people support it
According to a recent study from Resourceful Compliance, 80% of people surveyed support raising the minimum wage. Not surprisingly, 93% of Democrats reported as more in favor. Republican support was lower, but still at 66%.
Factors that did not show a significant difference in the survey were age and gender. The majority of people, regardless of their gender, age or political affiliation agree that $7.25 is far too low.
The proposed Raise The Wage Act suggested raising the minimum wage to $15 by 2025, which would impact over 33 million workers. Though only three Republicans voted for the bill out of 231 members of the House in 2019.
3. The U.S. can afford it
Yes. Companies may have to accommodate higher wages for their employees and consumers may have to get used to higher prices. Although it’s a significant change to the consumer’s wallet, some experts believe that once higher wages are adopted, large companies can absorb costs by building them into their business models and avoid significant profit losses.
According to the Economic Policy Institute, the U.S. economy’s capacity to increase wages has doubled over the last 50 years when you measure labor productivity. If the minimum wage rate had stayed consistent with increases in labor productivity, it would have reached $20 dollars in 2019.
4. It would stimulate the economy
There are obvious benefits for employees. But raising the federal minimum wage would also benefit the economy. It would put money in peoples’ bank accounts, which would allow them to buy things, start businesses and buy homes.
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By putting more money in the hands of low wage workers, Ronald Auerbach, author and educator, suggests that “consumers will take that money and spend it at businesses. It’s pumping money into the overall economy and putting consumers in a better financial position.”
“And depending upon your overall earnings through wages and other sources of income, the government may also collect higher tax revenues from these consumers. So it’s a win for consumers, businesses, and even the government at all levels,” Auerbach adds.
5. Laws for the minimum wage vary by state
Some states have adjusted their rate to keep up with living costs, others have not. And if they chose to, they can take as long as they want. Illinois for instance has stated they will increase its minimum wage to $15 by 2025. While that’s a great step, 2025 is a long way away for the average family. Even in the most affordable areas, $7.25 is still low. A federal increase would ensure every person in the country works for a reasonable wage — boosting job morale along with it.
Source: U.S. Labor Department, state government websites
“Some in Congress have taken the attitude that there’s no reason to increase the minimum wage because some states have higher minimums,” says Auerbach. “Others feel it’s more the burden of states to set their own minimums for their areas rather than having it set on the national level.”
6. It would reduce poverty
The truth is, those opposed to raising the minimum wage are not the people who deal with the implications of living off such a low wage. In addition to putting money back into the economy, increasing how much people take home would reduce the number of families living at or under the poverty line.
Not only would they be able to comfortably cover basic living expenses like rent and groceries, but doing so would afford them time to save money faster. As well as establish financial security through things like emergency funds or retirement accounts –– which more than half of Americans can’t afford to maintain.
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