Top 10 Reasons the Government Should Raise the Federal Minimum Wage
The minimum wage is a point of contention for almost all Americans. The people who make minimum wage insist that it is not enough to live on, and they simply cannot comfortably buy all of the basic necessities required for normal life including food, housing and insurance when they make less than $10 an hour.
Conversely, the people that pay their workers minimum wage insist that the minimum wage must remain low for the sake of everyone. Big corporations say that if workers want to keep their jobs, they must accept a low wage because anything higher would destroy the business and stall job growth.
The government is caught somewhere in between. In its heart, the government knows that Americans need to make more money to live and care for themselves and their children. However, the government is also tied to big business, which directly influences campaign funds and policy decisions by extension.
The federal government needs to shake off the yolk of big business and begin to listen to its citizens and its economists. Raising the federal minimum wage will not wage war on the economy. On the contrary, it will end up benefiting everyone in different ways.
Here are the top 10 reasons the government should raise the federal minimum wage:
10It Will Help Americans Make Ends Meet
The price of essentials, such as housing and food, are rising in America. This rise is simply not met by the minimum wage. The result is that the minimum wage workers that America relies on to keep other goods affordable are literally left out in the cold.
America needs a minimum wage. There is no doubt about that. The minimum wage is a useful tool for the economy to keep a ceiling for the cost of goods throughout many industries. However, there is no rule that says that the minimum wage cannot be a living wage. The current minimum wage is not suitable for meeting the basic living costs of most of the American public.
Of course, living costs differ by geographic area. It is much cheaper to live in rural Iowa than it is to live in San Francisco. However, it is not how much families struggle, but that they struggle at all, that should prompt a national minimum wage.
The federal government should set a minimum wage for workers across the country. This would help ensure that both people in Iowa and people in California have the money they need to live their lives and feed their children. This can serve as a baseline number for the states to adjust according to local living costs. However, it is the national government that should set the standard for fair wages so that it can lead by example.
Raising the minimum wage to $10.10 would help 27 million workers bring home an extra $35 billion annually.
9It Will Help Alleviate Income Inequality
Income inequality in America is no longer an issue that simply requires your attention. It is an epidemic, and the closest thing that the country has to a financial plague.
The country’s top earners do not earn 10, 20 or even 30 times as much as the lowest paid workers. The CEOs of companies in America make 933 times more a year than a person who works full-time and receives minimum wage.
This sets a dangerous precedent for Americans. It suggests that some Americans are worth nearly 1,000 times more than others. This is simply not true. Most CEOs would not have companies to run without people who were willing to work for minimum wage. It is these workers who are the backbone of American society, not men in ivory towers.
Raising the minimum wage will help alleviate this income inequality by making it easier for people to live fuller lives on the minimum wage. The minimum wage workers of America are important. The federal government can show them that by putting their needs above the needs of the CEOs and raising the minimum wage.
8It Won’t Stop Job Creation
Every time they are asked about raising the national minimum wage, the politicians cry out and say that by doing so that it would slow job creation. For Washington, job creation is the trump card in the fight for more equal pay.
There is no historical evidence that suggests that raising the minimum wage would destroy jobs. In fact, the idea of this is ludicrous. The minimum wage has risen substantially over the last 50 years, and jobs have not dwindled. Americans on minimum wage make twice as much as they used to, but that has not killed jobs. The idea that the minimum wage kills jobs is what the big business owners and their personal politicians want you to believe. They don’t want to pay higher wages because it means that there is less money left over for themselves.
The key findings of the Harkin-Miler proposal show that if the federal minimum wage was increased to $10.10 the effects on the GDP would be positive. This increase would affect 27.8 million workers who would all take home substantially higher wages, and then spend these wages in the economy. The result would be a $22 billion growth in the GDP. That growth would translate to the creation of 85,000 new jobs.
The rich cannot even fathom a world where the rest of the population have any type of disposable income. However, it is important that they begin considering it. Although they would be knocked from their spots as society’s elite, they would actually benefit from it over the long term. When more people have more money to spend, this would provide a moderate boost to the economy, and a better economy benefits everyone.
7It Would Relieve People from Relying On Food Stamps
There is a big disconnect between the people that are supposed to use food stamps and the people who actually rely on food stamps. By definition, one might assume that food stamps would be used only by the very poor and unemployed. Unfortunately, the under-employed are also reliant on food stamps in order to make ends meet.
Raising the minimum wage could help minimum wage workers be able to afford basic food products so that they are not required to rely on government assisted food programs.
A recent report suggests that if the minimum wage was increased by only 10 percent, it would reduce the food stamp program enrollment between 2.4 and 3.2 percent. It would also reduce the program’s costs by 1.9 percent.
If the government chose to raise the federal minimum wage to $10.10 per hour, the raise would result in the reduction 7.5 percent to 8.7 percent of current food stamp enrollments. This means that between 3.1 and 3.6 million people could afford their food on their own.
Preventing more people from relying on food stamps would do more than just save the government money. It would boost the self-esteem of all of the people who work hard, but still need extra help. It would help them make ends meet and help them avoid the stigma that so much of society associates with government assistance programs.
This boost in self-esteem for three and a half million people does not have a valuation; however, it comes at a price. The workers should not have to bear this price. Instead, they should benefit from a government that helps them earn a living instead of preferring an economy that takes advantages of its workers by paying them pennies.
6It Will Save the Federal and State Governments Money
Both the federal government and the state government spend a lot of money helping out the poor. They help the unemployed, the sick and even those who work full time jobs but cannot provide for their families. Raising the minimum wage would save the government money because a raise to $10.10 would take 1.7 million people off of various types of public assistance.
For example, the higher minimum wage would result in a less expensive food stamp program. Raising the minimum wage would result in a 6 percent cut in the amount of money the program needs to operate. This 6 percent cut would result in a savings of $4.6 billion dollars annually. This is only one of the government assistance programs that would benefit from a higher minimum wage.
There are several other programs that would require less money if Americans relied on them less. Overall, the federal government alone could stand to save $7.6 billion dollars from all of these programs because 27 million American workers would be receiving a wage that they could live on.
This money could then be reallocated to give greater help to those who are poor and vulnerable and to help fewer people rely on government programs in the future.
5It Will Promote Economic Security for Americans
The problem today is that the people who make minimum wage are no longer just teenagers working for pocket money. One of the most important reasons that the government needs to raise minimum wage is because most college graduates now leave school and begin to receive and income based on minimum wage.
College graduates today are not like the graduates of 10 or 20 years ago. Many of them are leaving school not bright eyed and bushy tailed but exhausted and indebted to the government. Some American students leave university with a degree and a loan the size of a mortgage. The most difficult part of this problem is that it is not stagnating; it is only getting worse.
College students have six months after graduation to prepare for the real world. They have only six months to find suitable employment, keep it and begin to save to pay back their loans. Many of those students find employment in jobs that pay minimum wage to tide them over until their first full-time salary comes.
When it comes time to make their first payment back, some are spending more than half of their monthly salary on their student loans. This leaves very little money left over to afford increasing rent prices, food costs, health insurance and saving for the future so that they can afford to transition in their job.
This sets the new generation of workers up for failure before they even leave the gate. Instead of having the opportunity to learn to budget and save, these students make so little money that they are willing to go into default on a major loan before they reach the age of 30. All of this happened to them before they had time to make any major financial mistakes. They just followed the prescribed path that their parents told them would provide them security.
The people who work for minimum wage are already vulnerable. Those who struggle with crippling amounts of student debt are even more so. However, the government can do something to help both the workers and itself. If the government raised the federal minimum wage, graduates would be able to afford their loan payments and support their day to day needs. This would not just set young people off on the right track. It would prevent more graduates from defaulting on their loans after only a few payments.
4It Will Help Reduce Poverty
Poverty is a huge issue in America. It is most visible in the inner cities where the urbanites meet and all of society is on display. However, many of the nation’s poor are invisible because they live in rural areas.
The rural poor are some of the most vulnerable people in America. The urban poor have greater access to employment options and government programs which can help lift more people out of poverty. The rural poor are often left alone by the state government, the federal government and industry. They often rely on one or two employers to fill the need for the whole area. They also rarely benefit from poverty programs because the government simply doesn’t see these people.
Poverty for rural Americans is not a period of their life, but a life-long, intergenerational struggle. Because they have less access to opportunity, the rural poor are more likely to remain poor over a longer period of time.
One of the few ways that the federal government can directly help the rural poor is to raise the minimum wage. It is the minimum wage that is offered to most workers in rural areas. A higher wage would also go much further in the country than in big cities because costs of living are lower. It would also help lift these families out of poverty and help create a rural middle class.
3It May Benefit Businesses
There are major benefits for paying a higher minimum wage for retail stores and for the hospitality sector. Some retailers have started to provide higher wages for workers because they know better wages attract better talent.
Today, there is a wealth of college graduates who have been trained to think critically and analyze situations. Many of them have also taken courses in business, economics, psychology and sociology as a part of their degrees. They have a wealth of knowledge to provide any business. However, few people want to give their all to an employee who does not treat them well.
The benefits that businesses get go beyond knowledge and know-how. In 2006, an article by the Harvard Business Review outlined how Costco benefitted when it raised the wages of its workers.
Costco has 338 stores and 67,600 full-time employees. It is also the largest retail wholesale in the United States, and it also has a presence in foreign markets. Costco offers an average wage of $17 an hour, health-insurance and a comprehensive retirement plan to which it contributes $1,330 per year per employee.
Employee turnover at Costco is at 17 percent for first year employees and it drops to only 6 percent after that first year is up. Costco also has one of the most productive and loyal workforces in the entire retail sector. It also has the lowest rate of employee theft in the industry.
Costco created $43 billion in revenue in 2005. The next biggest retailer, Sam’s Club, created $37 billion. Costco generated its revenue with 38% fewer employees nationally than Sam’s Club did. Essentially, Sam’s Club spent more money to make less money, even though it paid its employees a lower hourly rate.
The benefits for businesses are clear. When employees are paid fairly, they are happy, productive and do not try to make up for what their owed through theft. Businesses can make more money when they pay more employees and they need fewer workers to do it.
2It Will Reduce Employee Turnover
Employers who pay only the minimum wage have high employee turnover. People who make minimum wage need to look for greener pastures because the minimum wage is simply not enough to live on. It is also not enough to deal with the daily challenges that many of these jobs present.
It is in the best interest of the business to hold on to its workers because the hiring process is long and expensive.
Losing staff regularly forces HR departments to go into overtime. These departments must be constantly interviewing, processing, hiring, advertising and training in order to keep the minimum number of staff on site. This costs a huge amount of time and capital that the business could be allocating to other things like innovation and growth.
In 2003, a study done by Berkley showed that staff turnover is much lower when the hourly wages are higher. In the study, the San Francisco Airport raised its employees’ hourly wage from $6.45 to $10 per hour by creating a living wage policy.
The result was that the annual turnover rates for those working in security dropped from a whopping 95 percent down to only 19 percent.
1It Will Help Improve the Lives of Children
It is clear that workers suffer when they are not paid a fair wage. However, the discussion too often focuses on the workers as employees and not as people who have families.
It is difficult to think about, but the lives that are touched the most by a low minimum wage are often children. Children whose parents don’t earn enough to live suffer because of the stress and anxiety their parents face. These children also have less time with their parents because their parents will often have to work over-time or several jobs just to make ends meet.
If the government raised the minimum wage, one in five children in America would benefit from having one parent who could better provide from them. It would boost their total family income and help provide children with the care, attention and opportunities they need to succeed later in life.
Children who have families that earn enough to cover their basic needs do better in school, are healthier and are likely to earn more money as adults.
Providing a higher minimum wage for working adults has a direct impact on their children. To create a better today and a brighter tomorrow for 20 percent of America’s children, the federal government should raise the minimum wage.
Raising the minimum wage to a living wage should be an obvious choice for the government. It relieves the government of financial burdens, creates jobs, raises the self-esteem of workers and has a direct impact on America’s children.
The thing stopping the government is not the cost or the science behind raising the minimum wage. It is not the numerous studies demonstrating the positive benefits for the economy when everyone earns a fair wage. What stops the government from mandating a fair wage for every American is its fear of backlash from the elite sector of America who have never had to worry about how they will buy food.
It is time for the American government to stand up for the American people and set a clear example for American businesses. Minimum wage employees are valuable to the economy and they deserve to be paid that way.