Max Edwards

Increasing the Minimum Wage

By reducing employment growth and/or eliminating jobs, economists have long understood that adoption of a higher minimum wage can harm the very poor who are intended to be helped. Nonetheless, a political drumbeat of proposals—including from the White House—now calls for an increase in the minimum wage from our current $7.25 per hour to levels as high as $15 per hour. These changes are coming after years of national debate about how the government needs to raise pay so families can earn a living wage. The first time the U.S. federal minimum wage was established during the Depression and was first instituted in 1938 as part of the Fair Labor Standards Act when it was 25 cents per hour, since then it has risen from to $7.25 per hour. Despite the increases, inflation has eroded its value. To make todays minimum wage return to the value it held in 1968 would require an increase to almost $10 per hour. President Obama initially proposed raising the minimum wage to $9 per hour in his February 2013 State of the Union address which in adjusted terms would put it back at its early 1980s level. The President later embraced a proposal in Congress to raise it to $10.This would boost the wages of an estimated 15 million people according to administration. Supporters of these efforts make it known that women in particular are likely to benefit significantly. But increasing the minimum wage may have other economic impacts beyond adding more money to employees’ pockets. The impact of a higher minimum wage has on annual income depends on how it affects employment. For example, if the national minimum wage increased to $13 per hour, a lot of those earning $7.25 per hour now would benefit from a pay increase of $5.75 at the least. Members of the workforce earning less than $12 an hour, on the other hand, could lose their jobs and