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Minimum Wage Raised In Numerous Cities Across Country — Great News Or Economic Disaster?

By Scott Falkner
Published on: 02:24 PST, Mar 1, 2015

In several cities and in some states across the country, the minimum wage that workers will make per hour is steadily rising. Now the question is whether this great news or a recipe for economic disaster.

It all depends on who you ask, of course.

Effective tomorrow, the minimum wage in Oakland, California, will rise to $12.25 per hour and will raise accordingly with standard of living increases over the next several years.

Starting on January 1st, 2015, San Francisco employers must pay their employees $11.05 per hour, and that rate will steadily increase to $15 per hour over the next four years.

Several states have implemented much smaller minimum wage increases, (ie. Alaska, whose current minimum wage has been kicked up to $8.75 per hour and will increase to $9.75 per hour on January 1st of next year, and Arkansas, whose minimum wage has been raised to $7.50 per hour and will raise to $8.00 per hour next year and $8.50 in 2017).

So what are the effects of all these minimum wage hikes? Some would say that higher wages mean that individuals have more money to spend across the board. Higher minimum wages mean that consumers spend more money in stores, leading to employers making more money, which in turn leads to employers being able to pay the higher minimum wages. Others don’t see it that way. Some think that if employers are forced to pay higher minimum wages — especially small businesses — the only way they can afford to pay those wages are to decrease the number of employees and/or to raise the price of their products.

Still, others make the argument that entry-level jobs that pay minimum wage shouldn’t be looked at as lifelong positions. Some say that minimum wage positions should be held by the likes of high-schoolers and shouldn’t be looked at as jobs that are going to support families and offer individuals the ability to save for retirement. Those positions, then, don’t need a higher minimum.

One case study could be made of Seattle, Washington, a city which raised its minimum wage to $15.00 per hour — the highest in the country — in early 2014. The Seattle Times used a survey research firm to find out what sort of impact the minimum wage hike would have on Seattle businesses. Over 70 percent of the businesses surveyed said that the $15 minimum wage would cause a “big increase” in their labor costs, (no surprise there) and over 60 percent of the businesses said they planned on passing along the increases to consumers via higher prices. Forty-two percent of the businesses surveyed said that they would be decreasing the amount of employees in their operations as a direct result of the minimum wage increase.

Apparently it comes down to this: As a result of minimum wage hikes, employees will have more money to ultimately spend as consumers. However, as an additional result of those hikes, fewer employees will be making higher wages, and they’ll be paying more money for the products they purchase.

What do you think? Is a higher minimum wage the answer to America’s economic problems, or is it a prescription for bigger problems down the road? Make your voice heard in the comments section below.

[Photo by Ian Waldie/Getty Images]

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