Alia Dahlan

Dr. Bret Zawilski

RC2001
10 November 2016
Raising the Minimum Wage
With 2016 being an election year, Americans were bombarded with stimulation about the
presidential election. On November 8th, we voted for many other issues at the state and local
level also, including minimum wage laws. Minimum wage is the lowest hourly pay that a worker
can legally make, unless the job falls into certain categories. This year, four states voted on
whether they should increase the minimum wage. Minimum wage is a state regulation, except for
the national minimum wage of $7.25 per hour for non-tipped work. For example, North Carolina
sticks to the federal minimum wage. This is a pressing issue because the outcome impacts the
economy in tremendous ways.
The four states that voted on this are Washington, Colorado, Maine, and Arizona. They all
plan to implement legislation gradually with target rates set for 2020. In Washington, it was
proposed for $13.50 per hour, while in Colorado, Arizona, and Maine they proposed $12.00 per
hour (Sahadi). In the past, minimum wage increases were broadly accepted and citizens usually
passed proposed legislation. This was the case during the recent vote, also. All four states
approved the decision to raise the minimum wage. Colorado voted to initially start the minimum
wage at $12.00 by 2020, but it will increase in relation to living costs from that point forward.
There was also a vote for lowering the minimum wage in South Dakota, but it did not pass. It
would have lowered the minimum wage for non-tipped workers under 18 years old (Domonoske)

The impact of increasing, or not increasing, the minimum wage has large economic
impacts. Those who support increasing the minimum wage argue that $7.25 per hour for 40
hours each week is not enough money to live off of independently and without financial
assistance. It would also decrease job turnover and assist in addressing the issue of income
inequality in the US. Those who are against increasing the minimum wage argue that companies
cannot afford to pay their employees more without making cuts elsewhere, such as laying off
existing workers. Opponents of minimum wage increase also argue that the job market for lowskilled workers would shrink and prices may rise for consumers because goods would be more
expensive to manufacture (Cato).
There are a few useful terms to be aware of when discussing minimum wage in the field
of business, specifically finance and economics. Living wage is the local (usually calculated
based on city or county) hourly rate at which people could support themselves and financially
independent. This takes into account food, housing, commute, and other necessities. It is
currently $12.50 per hour in North Carolina (Just Economics). Wage push inflation is inflation
that occurs as a result of widespread increases salaries and wages (Minimum Wage
Investopedia). The wage gap refers to the disparities in hourly wage between different
demographics of people doing similar jobs.
Personally, I support raising the minimum wage and advocate for living wages. In the
summer of 2014, I had a marketing internship at Just Economics, a non-profit organization in
Asheville, NC dedicated to creating a just and sustainable local economy through their living
wage certification program and seminars for low-income families. Before my involvement with
Just Economics, I was not completely aware of the widespread poverty in North Carolina and the
United States. I did not realize the struggle some people go through in a workplace with low

wages or worker injustice. I helped to spread Just Economics message on the internet and
through their Living Wage Certification program (Just Economics).
I believe increasing the minimum wage has many positive effects on the economy. If
employers pay better, they will have a lower turnover rate, which means that they will cut
training costs because they have to train less employees. Existing employees are also more
efficient because they have more experience. Employees who are financially secure perform
better at work because they have less stress about their financial situation, as opposed to
someone who is making $7.25 per hour. Because raising wages and worker productivity have a
positive correlation, employers can save money by hiring less workers because an employee who
is paid well and has a lot of experience will be more productive than multiple minimum-wage
new-hires. Contrary to popular belief, increasing wages decreases unemployment. This is
exemplified in Seattle where unemployment decreased from 6.3 to 5.2 percent when they
increased the minimum wage (Worstoll). Another example is from January 1950, when the
federal minimum wage increased from 40 cents to 75 cents, but did not have a significant impact
on unemployment within the United States (Pollin and Wicks-Lim). Also, when people make
more money, they have more spending power to contribute to their local economies.
The demographics of people earning minimum wage ($7.25 per hour) or less is
representative of those populations who have less privilege. In 2005, employees earning less than
minimum wage were more likely to be women, of Hispanic origin, young (16-24 years old) or
old (over 65 years old), lacking a high school degree, in service and sales jobs, working part-time
(less than 35 hours each week), and not represented by a labor union. These groups of people
might be expected to make less than others, but they usually come from poor families. They are
the ones who need more money the most, yet they make the least money. A higher minimum

wage would help the poorest families the most to help ends meet. Even those who make less that
minimum wage would likely see a pay increase if minimum wage increased (Minimum Wage).
Fast food restaurants are notorious for paying their workers minimum wage. There was a
study done analyzing the possible effects of having a $15 minimum wage at fast food restaurants.
The business would have to adjust to the new expenditure by raising worker productivity. The
restaurant saves money by having a lower turnover rate, thus decreasing recruiting and training
costs. Higher paid workers are more loyal to their jobs. More experienced workers are also more
efficient. Firms could also raise prices on their goods. Though this is not ideal, restaurants need
to adjust their prices periodically to account for inflation anyways. Also, if people are making
more money due to a higher minimum wage, they can afford to pay more for food. Businesses
can also make money by taking advantage of economic growth. When employees are paid more,
they contribute more to the local economy and increase revenue for the communitys businesses.
Restaurants can also make up for spending more money on wages by redistributing revenue.
They could decrease their profit margin, reduce pay increases for high-paid employees, and/or
reduce spending. A $15 minimum wage for fast food workers is feasible and beneficial for
business if the company is willing to make that initial investment (Pollin and Wicks-Lim).
The impact of changes in minimum wage affects many aspects of the economy from
stocks prices to commodity values (such as gold), and also consumer confidence along with the
political atmosphere. This is because the economy is so interconnected. Each change in policy
causes a ripple effect throughout the markets. When studying the wage effects of a minimum
wage increase, researchers found that when minimum wage is increased by less than 20%, it
does not make much of a difference for the workers. If the minimum wage is increased by over
20%, it has a strong positive wage effect, meaning that wage growth increases. This is especially

true for those who do not make much more than the new minimum wage. Minimum wage
increases have little to no effect on those making much more than minimum wage because their
compensation does not change (Lopresti and Mumford).
In terms of politics, those who are in favor of increasing minimum wage tend to be
fiscally liberal or progressive. This is tied to social views because increasing the minimum wage
reduces income inequality and levels the field for people from different economic classes. Those
who are not in favor of increasing the minimum wage tend to be fiscally conservative. This is
tied to the interest in business and the success of corporations. The success of the economy is
dependent on those with the most money.
As more states decide to increase the minimum wage and the prospect of the federal
government increasing the minimum wage, Americans will have to continue thinking about the
short- and long-term effects of it on the economy. Changes in the minimum wage affect so many
people that it is an issue that calls for more research and analysis as more policy is written about
it.

Works Cited
Cato Institute. "Four Reasons Not to Raise the Minimum Wage." (n.d.): n. pag. Web. 17 Nov.
2016.
Domonoske, Camila. "4 States Opt To Raise Minimum Wage; 7 Loosen Marijuana Laws." NPR.
National Public Radio, 9 Nov. 2016. Web. 10 Nov. 2016. <http://www.npr.org/sections
/thetwo-way/2016/11/09/501350808/4-states-opt-to-raise-minimum-wage-6-loosen-marij
uana-laws>.
Just Economics. "About Living Wage." Just Economics. Just Economics of Western North
Carolina, 2016. Web. 10 Nov. 2016. <http://justeconomicswnc.org/about-living-wage/>.
Lopresti, John W., and Kevin J. Mumford. "Who Benefits From A Minimum Wage Increase?."
ILR Review 69.5 (2016): 1171-1190. Business Source Complete. Web. 10 Nov. 2016.
Minimum Wage. [Electronic Resource] : Characteristics Of Low-Wage Workers And Their
Families. n.p.: [S.l] : [s.n.], 2008., 2008. Library Catalog. Web. 10 Nov. 2016.
"Minimum Wage." Investopedia. Investopedia, LLC., 29 July 2015. Web. 10 Nov. 2016.
<http://www.investopedia.com/terms/m/minimum_wage.asp>.
Pollin, Robert, and Jeannette Wicks-Lim. "A $15 U.S. Minimum Wage: How The Fast-Food
Industry Could Adjust Without Shedding Jobs." Journal Of Economic Issues (M.E.
Sharpe Inc.) 50.3 (2016): 716-744. Business Source Complete. Web. 10 Nov. 2016.
Sahadi, Jeanne. "4 States Will Vote on Raising Minimum Wage." CNNMoney. Cable News
Network, 1 Nov. 2016. Web. 10 Nov. 2016. <http://money.cnn.com/2016/11/
01/pf/minimum-wage/>.
Worstall, Tim. "We Are Seeing The Effects Of Seattle's $15 An Hour Minimum Wage." Forbes.
Forbes Magazine, 16 Mar. 2015. Web. 10 Nov. 2016. <http://www.forbes.com/sites
/timworstall/2015/03/16/we-are-seeing-the-effects-of-seattles-15-an-hour-minimum-wage
/#4f970a18715a>.