Should The Minimum Wage Be Raised?

#189 Will increasing the minimum wage help or harm workers and businesses? How many U.S. workers are paid at or below the minimum wage? More information, including show notes, can be found here. Episode Summary – Should The Minimum Wage Be Raised? Nearly every employee in the United States has grappled with the minimum wage question at some point in their lives. High schoolers, recent college graduates, and older workers all ask themselves, “Can I survive on an hourly job making the minimum wage?” Professors, industry leaders, and government officials debate over if the national minimum wage should be raised, and if so, by how much? Join David Stein as he sheds light on this challenging episode and uncovers truths behind the minimum wage in the United States today, where the workforce is headed in the future, and some creative potential solutions. The current state of the minimum wage in the United States The minimum wage was initially created in the 1930s to prevent employers from forcing workers to work for pennies on the hour. Businesses and governments at every level were asking themselves, “Can companies survive if they are forced to pay workers a set amount?” Today, that same question is being asked. While the minimum wage has come a long way from the original $0.25/hour amount – the current national minimum wage is $7.25/hour – a large portion of the workforce is still being paid hourly. According to the Bureau of Labor Statistics, 80 million workers aged 16 and up work hourly, with 701,000 making exactly $7.25/hour and 1.5 million earning less than minimum wage. For more statistics on the current state of the minimum wage workforce, be sure to check out the full episode. What is the impact on the workforce if the minimum wage is raised? There are countless short and long-term impacts on the American workforce that would arise from raising the minimum wage. While short-term impacts are nearly indistinguishable from not changing the minimum wage at all, many jobs will be lost in the long run as a result of raising the minimum wage. As explained in the “Wage Shocks and the Technological Substitution of Low-Wage Jobs” research article, automation is quickly substituting humans in routine cognitive jobs – and contrary to popular opinion these jobs are not being lost to offshoring either. To hear more about the varying impacts from raising the minimum wage, be sure to listen to this episode of Money For the Rest of Us. Three enlightening findings from the most recent study on the minimum wage According to the article “Industry Dynamics and the Minimum Wage: A Putty-Clay Approach” there are three major findings surrounding the minimum wage that employers need to be paying attention to. The first discovery found that the exit and entry of low-wage restaurants in the marketplace increases in the year following an increase in the minimum wage rate. But, over time, the low-wage restaurants were substituted with more capital-intensive establishments. The article also explains that in every case study examined, the cost of higher minimum wages were fully passed onto consumers in the form of higher prices. Finally, the article demonstrates that the impact of minimum wage increases grew over time. Why raising the minimum wage isn’t the solution David explains that essentially, raising the minimum wage increases the level of automation in the workforce, while simultaneously increasing the level of vulnerability for hourly-paid workers. It’s no longer enough for companies to simply work to maximize their own profits. Industry leaders must begin to ask themselves questions such as: “What role do we play in the community? How are we managing our environmental impact? How are we helping our employees adjust to an increasingly automated world?” Your personal ability and your company’s ability to help create a fair work environment for all will greatly benefit from listening to this insightful episode of Money For the Rest of Us. In This Episode You’ll Learn [0:15] David asks the question for this episode, should the minimum wage be raised? [5:44] Current state of minimum wage in the United States [8:33] What is the impact on the workforce if the minimum wage is raised? [11:07] Three major findings from “Industry Dynamics and the Minimum Wage: A Putty-Clay Approach” [13:33] “People Versus Machines: The Impact of Minimum Wages on Automatable Jobs” [17:01] David shares his personal experience surrounding minimum wage jobs [21:24] Why raising the minimum wage isn’t the solution [24:30] The call-to-action for employers and industry leaders