What Will Happen If We Raise the Minimum Wage?Feb 21, 2022
(soft music) - So, before I was the amazing YouTube host you see today, I worked
wageat a donut shop. This is the actual shirt I wore when I worked there for two years. Now, I mean, the job had obvious benefits. Oh, notice that, just like these here. But the pay? (mumbles) The pay, that wasn't so good. (etch scratches) This is great. The
wageis the absolute lowest wage that the law allows a business to pay a worker. Nationwide, the US government has set it at $7.25 an hour, and it's been that way for ten years.
But my job was in Oakland, California, which passed its own minimum wage law, so I was making $12.25 an hour. So if I get paid five dollars an hour more than the federal minimum wage, isn't that a good thing? Well, Oakland is part of the Bay Area, which is one of the most expensive places in the entire country. I'm talking $7 coffee and $1,500 a month to rent a bedroom. No, not an apartment, the bedroom. No kitchen, no living room, just a room, with four other people also renting a room. It's crazy. That's why I still live with my mom.
Thanks Mom! Now, if you had the same job at a donut shop in, say, Houston, Texas, you'd be making the same $7.25 an hour, because that's the minimum wage there. And that brings us to the never-ending minimum wage debate, some think $7.25 an hour is too low to survive no matter where you live, even if where you live is cheap. They want to
raiseit to $15 an hour, so no matter
whatcity or state you work in, you can't make less than that. Others think that the minimum wage is not designed for people to survive. It's supposed to be an entry-level salary for unskilled workers to get their foot in the door, pick up skills, and then quickly move on to higher-paying jobs.
Raising it could force companies to lay off workers and
raisetheir prices, which could hurt the economy. So should the United States raise the federal minimum wage? The reason people are talking about minimum wage today is because of
happened seven years ago, at the end of 2012. Hundreds of fast food workers in New York City walked out demanding better wages. The reason? The minimum wage was not enough to survive. Those strikes became the Fight For $15 movement, which went national and pushed to increase the federal minimum wage from $7.25 an hour to $15 an hour. Democrats in the House of Representatives took notice.
They recently passed a bill that would increase the minimum wage to $15 an hour by 2024. But Republicans in the Senate have no plans to accept the bill. And President Trump has threatened to veto it if it ever passes. So he practically has zero chance of passing at this point. But if you really want to understand the minimum wage debate, you have to go back even earlier, to the late 1800s. Historians called it the Gilded Age. Business was booming, but there was great inequality, most of the money went to the people at the top, guys in top hats and monocles who owned the railroads, and most of the businesses, and Boardwalk. and Park Place.
Now we all know that you can't win when someone owns Boardwalk and Park Place. Basically, these guys had all the power and didn't pay their workers any good. In 1890, the average American made $380 a year, that's $11,000 in 2019 dollars. That can get you, how much, maybe three months' worth of rent in San Francisco? Maybe? When the Great Depression hit in the 1930s, President Franklin D. Roosevelt wanted to do something about inequality. In 1938, Roosevelt signed the Fair Labor Standards Act, which set the first national minimum wage at 25 cents an hour, which would be about $4.45 today. Since then, Congress has raised the minimum wage 22 times.
The current level of $7.25 was last set in 2009, when President Obama signed it into law. And that's what makes the US minimum wage debate different. Many other countries link the minimum wage to inflation. See, as time goes by, money is worth less. $100 in 1900 could buy a lot more than $100 could buy today, so tying the minimum wage to inflation means it automatically increases every year or two so it doesn't lose value. The US requires a new law every time the minimum wage increases. That means the House, the Senate and the President have to approve it. And they disagree on things so often.
That is why we have the same minimum wage that we have had for the last ten years. And during that time, it has lost 16% of its value, that $7.25 per hour is now worth $6.10 per hour. Now, this is where things get a bit tricky. States, counties, and even cities can pass laws to set their own minimum wage. It just has to be equal to or greater than the federal minimum wage. For example, in California it costs $12 an hour, but in the city of San Francisco it is more than $15. Looking at the country as a whole, 21 states have a minimum wage of $7.25 an hour.
But in the other 29 states plus D.C., there is a higher minimum wage. And then there are the counties and cities dotted with their own minimum wages. For many supporters, raising the minimum wage is a basic question of justice in a society where income inequality continues to rise. They think that putting more money in the pockets of low-wage workers is an effective way to reduce poverty. Let's look at the numbers. $7.25 per hour equals $58 per day if you work eight hours. So if you work five days a week, every week, non-stop for an entire year, you would make just over $15,000.
Check out this federal government poverty table. A worker supporting a family of two would be nearly $2,000 below the poverty line. So what
happens if he increases his wages to $15 an hour? A congressional budget office report estimated it would raise the wages of 27 million workers and lift 1.3 million people above the poverty line. It is also important to understand who the typical minimum wage worker is. An old stereotype is that they are mostly just teenagers in high school who need a little extra spending money. Now, it is true that adolescents make up a large portion of minimum wage workers, but more than half are over the age of 25.
Many of these workers earn so little money that they qualify for some form of government assistance, such as food stamps or housing assistance. A study by the Economic Policy Institute found that for every dollar the minimum wage increases, government assistance spending is reduced by $5.2 billion. So if companies had to pay their workers more, they would actually save the government money. Now, it's one thing to talk about raising the minimum wage in theory, but what does it actually look like on the ground? To find out, we hit the streets of San Francisco, which has one of the highest minimum wages in the country at $15.59 an hour.
We spoke to a 25-year-old who makes a little more at a local grocery store, and the owner of several packing and shipping stores that employ minimum-wage workers. He is also president of a local business association that was against raising the minimum wage in San Francisco. - If my salary was $7.25 now, at this point, it would be very difficult. I'd probably be working seven days a week, six days a week, and I'd really have to save a penny and really learn to budget, you know? But now, now that I'm making a little more money, that gives me a little bit of room to play, a little bit of time to stretch out, you know.
And it makes me capable of doing more things. - The owner of the company has a slightly different opinion on the increase in the minimum wage. - The worst case scenario, in my opinion, is that if the minimum wage goes up too much, you
willsee that many companies consider other options, eliminating the human being. My response to that was that I invested in a lot of technology, which reduced a lot of the labor-intensive parts of my business, so I ended up hiring fewer people. And now I employ a lot fewer people and have more locations.
So the net effect is that I'm employing fewer people. - And this brings us to the main argument against raising the federal minimum wage. Many people think that it
willkill jobs. Think about it, raising the minimum wage means companies have to spend more money to pay their employees. And not all businesses are like Amazon or Apple, with infinite amounts of money. Many are small mom-and-pop stores, so they may have to cut employee hours or lay people off. Economists have been debating for decades whether or not to raise the minimum wage kills jobs. Many agree that a small increase won't do it, but going from $7.25 to $15 is no small feat.
It is more than double. A report from the Congressional Budget Office predicts that a $15 minimum wage could force employers to lay off 1.3 million workers. And if you're a teenager, I'm sorry, but they're usually the first to go, because they have the least amount of skills, and it's not profitable to pay them a high salary to essentially learn on the job. If we raise the minimum wage, some economists worry about what that would do to the economy. With higher wages, many companies would have to raise their prices to pay for it. Over time, that could increase the cost of living, and low-wage workers could be back to square one, where everything is too expensive compared to the amount of money they earn. - Somehow people thought that, "Hey, 'you're going to raise the minimum wage' and everyone is going to have more money." But you don't realize that, okay, well, somebody's making $10 an hour, and their wage goes up to $15, well, that burger you've been buying for $10, now it's probably going up to $12 or $13, as long as nothing else goes up, apart from the minimum wage. - Other companies could do the opposite.
They could do the math, figure they can't afford the higher salaries, and just shut down. Okay, so you've heard the main arguments for and against raising the minimum wage. There are many potential pros and cons, and even the experts disagree. But what do you think we should do and why? Let us know in the comments below. And if you like numbers, check out an episode we did on universal basic income. And for all teachers, if you want to bring this topic into the classroom, please visit our website, KQED Learn. I'm your host, Myles Bess. Peace, blessings, hugs and kisses, I'm going to finish the rest of the donuts.
See you later!
If you have any copyright issue, please Contact