The Impacts of Minimum Wage

            With minimum wages increasing in the state of New York there are both positive and negatives that come along with it. Minimum wage is the lowest amount that can be permitted to be paid, every city and state has a set minimum wage distinct from one another. Raising the minimum wage brings forth a stimulation in consumer spending that causes a boost in the economy, job growth and an increase demand in the economy. There are great outcomes from increasing minimum wage, although possible unemployment, increase in prices such as rent, food and gas are other outcomes as well. So, is raising the minimum wage in New York a positive change for all parties affected by it? In this paper I will be discussing how the most affected by this topic are going to be those of low-income background, in some cases positively but for most it can bring forth negative outcomes.

The increase of minimum wage in New York City to $15 per hour has been one of the biggest increases in all of New York State and has furthered good outcomes. According to Kimberly Amadeo, article writer of “Minimum Wage with Its Purpose, Pros, Cons and History” for the balance.com, states that one of the advantages of minimum wage are that workers can cover their costs of living. Secondly, the increase “reduces income inequality while providing an incentive to work”, meaning that the increase encourages people to work because they feel less inequality within their work society. Third, “a minimum wage spurs economic growth”, since workers will have a boost to their hourly wage that means it gives them more money to spend and the more money spent, there will be an increase in demand and business revenue. Fourth, the more money and time a worker has the more they can invest in their education. The investment in their education “further increases their productivity…improves the country’s labor pool… and a more educated workforce increases innovation and the number of small businesses”. Lastly, “minimum wage laws benefit individual businesses”, Amadeo explains that workers are less likely to leave their job to find a higher paying job which reduces the turnover and high-priced retraining costs.

            In addition to the advantage allowing workers to cover their costs of living is demonstrated in Chart 1 from the Office of the Assistant Secretary for Planning and Evaluation (ASPE) 2020 poverty guidelines. This chart demonstrates the poverty guidelines within the United States based on the number of persons in a family/ household. The advantage is that this allows the minimum wage of $13- $15 to be enough for a single person to work twenty hours weekly (part-time) for a whole year creating a stable income amount above the poverty level. For example, when I worked in retail as a part time worker of twenty hours weekly at the pay rate of $13, my monthly income covered my transportation, phone and insurance bill and food. The only thing I wasn’t able to afford would be my rent. This obviously differentiates from household to household depending on location, but is still a huge problem for part time workers making minimum wage. Additionally, the incentive that is created with an increase in minimum wage leads more people to avoid the welfare program; government support for citizens at any income level but is mainly to ensure that citizens are meeting their basic humane needs. The avoidance of welfare creates less stress in a household because the program is not consistent nor guaranteed, so the increase in minimum wage encourages individuals to continue working due to their hourly wage being set at a higher rate. Also, avoidance of means less strain of government funds when fewer people rely on it.

            Although there are advantages to the increase of minimum wage, there are also some disadvantages that tag along with it as well. Alison Doyle, a job search expert for the Balance careers, states the disadvantages of increasing minimum wage in her article “Pros and Cons of Raising the Minimum Wage” first, “in companies with a fixed compensation budget, an increase to the minimum wage could result in layoffs or slower hiring”, not every company has the ability to provide each worker with an increased hourly wage if they have a planned limit budget. Secondly, an increase can motivate employers to invest in technology and machinery in order to increase productivity rather than relying on human resources. A third disadvantage is that it can result in an increase high school dropout rate, this is more common in low income families. The reason for that is due to increasing minimum wage trying to balance out with the inflation of rent, bills, food and gas. Lastly, “prices might be increased to offset higher labor costs”yet this also puts small businesses at risk because not every customer will to pay for increased prices and if it’s common then the small business will have to close due to the lack of paying customers.

According to a study done by the Congressional Budget Office titled “The Effects on Employment and Family Income of Increasing the Federal Minimum Wage”, the $15 minimum wage sets forth disadvantages to low wage workers especially by the year 2025. There will be an increased amount of low wage workers to be jobless and this will influence their families because it could place them under the poverty guideline. In addition Walter Block, an economist and instructor at Loyola University New Orleans, also states that “if a minimum wage law stipulates a rate pay above equilibrium, it will cause unemployment for unskilled workers whose (marginal revenue) productivity is below that level”. In general Block doesn’t agree that increasing minimum wage benefits everyone as a whole, it effects more negatively individuals and families from a low socioeconomic background especially with unemployment. The unemployment can be caused by either layoffs or what seems to be happening already in places like McDonalds, technology being a cashier rather than having an individual to do so.

            In conclusion I have come to believe that raising the minimum wage in New York is not a positive change for all parties affected by it. Middle and high-income classes will not be negatively impacted by the increase of the minimum wage. Yet “increasing the federal minimum wage would have two major impacts on low-wage workers: earnings would increase for many, which would lift some families out of poverty. However, other low-wage workers would become jobless, their family income would drop and it could place them below the poverty threshold” says Jack Kelly, senior contributor and author of “The Unintended Consequences of Raising Minimum Wage To $15” published on Forbes.com. Increasing the minimum wage also brings forth inflation, so your hourly pay rate will increase to the new minimum, but food and gas will increase as well and so will your rent (for those who rent housing). Overall, there is a great amount of advantage and disadvantages to an increase of minimum wage, but the the advantages seem to benefit business owners who can afford an increase pay to their workers and workers whose living expenses can be paid with the minimum wage. The low-income workers are the ones who will be most effected by the increase, unemployment and inflation are great factors that influence their living to possibly fall into poverty.