Seeing Both Sides: Minimum Wage

Alizeh Hussain – HB

The heated minimum wage debate has existed for decades. Conservatives and liberals take strong stances on either side of the argument; usually, liberals want a raise and conservatives don’t. Democratic presidential candidates Hillary Clinton and Bernie Sanders want a minimum wage as high as fifteen dollars, while Republican nominees Donald Trump and John Kasich argue that current wages are “too high.”[1] Ted Cruz even said that minimum wage shouldn’t exist at all. Why all the fuss? To me, minimum wage seemed like a pretty fair policy that didn’t deserve opposition. But a closer look revealed problems with both arguments.

Minimum wage currently sits at $7.25. Compared with the average cost of living, a worker receiving minimum wage can be up to $50,000 short.[2] Workers have to make more money to breach that gap, so many of them are calling for a $15 minimum. Furthermore, due to high unemployment, there is “not enough wage competition to ensure that low-wage workers earn a decent living.”[3] So liberals argue that raising minimum wage to ten, twelve, or even fifteen dollars can lift low-income workers out of poverty. Conversely, reducing minimum wage would lower their standard of living.

That liberal argument seemed a valid enough reason to raise the minimum wage, and I had never seen any issue with that suggested policy. However, the costs are equally significant, as demonstrated by basic supply and demand rules. When a minimum wage is raised above the equilibrium wage, it leads to more labor – more people want to work now – but less job availability – employers don’t want to hire as many people at that new price. Employers could not only stop looking for workers, but even lay off the ones they already have. The higher the minimum wage, the higher the unemployment rates. Though raising minimum wage is a noble effort, it could end up hurting a lot of current or prospective workers in the long run.

How can we weigh these benefits and costs to make the best policy possible? The reason there isn’t a perfect solution is because different people value different things. Liberals argue that raising the minimum wage may have its long-term costs, but the immediate benefits are guaranteed: more income for workers. Conservatives, however, value future job security and low unemployment rates over more money in laborers’ pockets. Furthermore, “economists disagree over how many jobs are lost when the minimum wage goes up.”[4] Because there is a disparity in how bad unemployment can get from higher minimum wage, there is consequently a difference in how much people value that result. Republicans see that opportunity cost as too high; Democrats don’t consider it that significant. In the end, it’s impossible to weigh the costs and benefits objectively in a way that everyone can agree on because people have different preferences. The key to a solution is compromise, which our politicians currently and will probably continue to struggle with.

[1] Steve Benen, “Cruz Sees the Minimum Wage as ‘Bad Policy,’” MSNBC, April 19, 2016. Accesses June 15, 2016.

[2] Fred Imbert, “Cost of Living is Increasingly out of Reach for Low-Wage Workers,” CNBC, August 31, 2015. Accessed June 15, 2016.

[3] Susan Adams, “The Minimum Wage Debate: Who’s Right?” Forbes, November 11, 2013. Accessed June 15, 2016.

[4] Charles Wheelan, Naked Economics (New York: Norton, 2010), 100.

Image: Getty Images. “Labor leaders, workers and activists attend a rally for a $15 minimum hourly wage.” Digital image. CNBC. July 22, 2015. Accessed June 15, 2016.





Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s