President Obama’s latest stimulus plan is a proposal to raise the minimum wage in the United States from $7.25 an hour to $10.10 an hour. In his February 12th State of the Union address, Obama stated “raising the minimum wage will reignite the true engine of America’s economic growth – a rising, thriving middle class’. Obama believes that by raising the minimum wage, he can increase millions of incomes and directly affect the economy. Democrats are backing Obama and argue that raising the minimum wage will funnel money directly into the economy and stimulate it. Republicans, myself included, think that raising the minimum wage is a quick fix for a long term issue and will end up hurting the economy in the long run.
Larger companies may not see a huge impact if the minimum wage is raised but Mom and Pop businesses and smaller companies will have a harder time hiring employees if they are forced to pay them higher rates. Lower skilled and younger workers are already struggling for jobs in this economy and companies who cannot afford to pay them more will be forced to eliminate positions. Yes, people who keep their jobs will be paid more but the ones who lose their jobs or cannot find a job will suffer. Jon Bartlett, small business owner and Partner at AtlasAdvancement, Inc. stated that although the wage increase will not affect his salaried employees directly the effect on small businesses he patronizes could potentially be negative. Dry cleaners, restaurants and family grocery stories could be forced to raise their prices in order to cover the forced wage increases. “I recently ate at a pizza shop in McLean, Jon said, and the owner told me if he had to pay his employees more my pizza would be more”.
A smarter way to alleviate poverty would be to increase the Earned Income Tax Credit, a program designed to help impoverished families stay in the working world. Democratic politicians do not want this offer on the table because it is federally funded. Increasing the cost of job creation (raising the minimum wage) wouldn’t take money from the federal government and it is a popular move. Even George W. Bush signed off on a minimum wage increase in 2006. However, he paired it with tax cuts and extra funding from the government to alleviate the pressure on smaller businesses. As of April 30th when I completed this post, Obama has not announced any tax relief plans or funding in conjunction with his wage increase at this point.
The White House website has a very detailed plan regarding raising the minimum wage and the positive affect it will have on the middle class. The bulletin states that “numerous economic studies have proven that raising the wage will not affect employment rates or the ability to create more jobs”. None of the sources for these studies are listed and there are not any statistics included. I like to see evidence and solid statistics in order to make an informed decision. Studies completed by the Bureau of Labor Statistics, professors of economics from Harvard, Yale and Texas A&M have proved that working people would not lose their jobs if the minimum wage is raised but fewer people would be hired and less jobs would be created in the future. In the second week of April I was standing in line at Baked and Wired, a popular bakeshop in Washington, DC. I curiously asked the cashier, who had a manager name tag on if the price of my latte would increase if they were forced to increase the wages they pay their baristas and bakers. I found out that store employees make above the minimum wage but the offsite bake staff follows the federal government wage guidelines. “Yes” he said, “I imagine if our overall production costs increase we would have to raise our prices or let employees go”. This was the same concern Jon Bartlett expressed when he gave his opinion on the matter. This statement solidified my opinion that small businesses would be hurt by a raise of the minimum wage.
In my opinion, raising the minimum wage will make it significantly more expensive to hire workers in high school or lower skilled workers. Our workforce is considered at a crisis level for unemployment rates. If you make adding jobs more expensive, less people will be working and poverty will not be alleviated. Obama consistently looks for quick fixes to large problems. Raising the minimum wage will not funnel money into the economy; it will ultimately eliminate the creation of lower wage jobs and continue the vicious cycle of poverty low income families are trapped in.
Author: Brittney R. Powers