The economy is unpredictable, but the downward trends that may occur from raising the minimum wage to fifteen dollars over the next six years need to be considered and prepared for, writes Margaret Valenti.

Everyone wants to make more money, but at what cost? Often, wage increases are discussed in the United States as a way to decrease the wage gap and make life easier for millions of citizens. If people have more money, they also spend more money, but this does not account for a possible increase in the price of products in the United States that could stem from the Democratic Congress proposal of a six-year increase in the minimum wage. 

The Raise The Wage Act would increase the federal minimum wage to fifteen dollars by 2025: $8.40 in 2019, $9.50 in 2020, $10.60 in 2021, $11.70 in 2022, $12.80 in 2023, $13.90 in 2024, and then $15 by 2025. The Democrat-controlled House of Representatives passed the act with 231 votes for and 199 against with a small number of Republicans and Democrats voting against their parties. While millions of citizens will make more money if this act passes through the Senate — which seems unlikely — it will also increase the costs of hiring and employing, which may decrease the number of people a business can hire or employ and lead to higher levels of unemployment. It may also increase the costs of United States products, which will increase the costs of operation. 

Overall, raising the minimum wage seems like a good idea and it does benefit millions of United States citizens. Currently, the federal minimum wage sits at around $7.25, but most states increased their minimum wages to above eight dollars. The dramatic levels of this proposed increase do bring the benefits of increased wealth to many citizens. An increase in the minimum wage creates more opportunity and may increase the amount of wealth flowing through the United States economy. However, there are many cons to be considered before being sure that a fifteen dollar minimum wage is the correct next step.

Cons To Raising The Minimum Wage

A huge talking point of this current administration is the jobs that are overseas because of the costs of labor and production in the United States. Simply put, sometimes it is cheaper to produce products and hire if a company produces and hires in countries other than the United States. The increase in wage — which could lead to an increase in the price of products — could send more companies overseas and see less money flowing through United States markets. As a result, more people will be out of work since there will be less local jobs. Ultimately, if those things happen as a result of increasing the minimum wage, that is a bad thing for the United States citizens and the economy.

Even if companies stay in the United States, the increase in the minimum wage and the possible increase in the price of products could disrupt the success of many companies. Furthermore, companies may have to hire fewer workers and decrease the size of their operation. In this case, companies may look to hire those who they do not have to pay minimum wage: immigrants who are not yet citizens of the United States. 

However, perhaps the increase in minimum wage does not disturb the costs of operation and only increases the wage of minimum wage workers. This means that if people are making more money and are able to purchase products at a higher price, perhaps a company will think about increasing those prices to make more money, which will have a domino effect on the United States economy. An increase in wages leads to an increase in the price of products which leads to an increase in the price of production and operation. Even if the increase in the minimum wage does not automatically affect the price of products, it will happen over time. Thus, the purpose of the increase will be diluted by the overall increase in the cost of living which may follow.

Ultimately, if the Raise the Wage Act passes through the Senate, the number of unemployed individuals in the United States could increase. A certain level of unemployment is not a bad thing — currently, the United States’ level sits at around 5% of the total population, which is stable —  however, too much unemployment is obviously a bad thing, i.e The Great Depression. 

From the wording of the Act, it seems like there will be a monitoring of the situation and how the Act will ultimately affect the economy since nothing is certain. However, there is nothing in the act about a cap on the price of certain products or costs of operation; imagine how hard that would be to pass. Even though the Act put in place a new federal minimum wage and clauses for tipped workers and workers under the age of twenty, there is no provision for protection should the raising of the minimum wage lead the United States economy into a downward trend. 

Only Time Will Tell How $15 Affects The US Economy 

So far, there is a lack of evidence to suggest that any significant change will occur due to a hike in wages this steep over a six-year period. There is also a lack of evidence to suggest a fifteen dollar minimum wage would significantly change anything, on a small scale. For cities or states where the cost of living is significantly higher, a minimum wage of fifteen dollars may make sense and many states including California, Illinois, Maryland, Massachusetts, New Jersey, New York, and Washington D.C. already had plans to increase the minimum wage to fifteen dollars by the 2020s. However, in more rural areas, where the cost of living in generally lower, an increase in the minimum wage to fifteen dollars may have a negative impact if there are no protections for current workers and those who will be working within the next six years.

The federal minimum wage does need an increase because right now people who live on minimum wage barely get by or have to work two or three jobs to make ends meet. However, the United States Government — Representatives, Senators, and the White House — needs to be careful about how to implement the Raise The Wage Act so that workers receive necessary protections, there is not too much inflation, and companies are still incentivized to remain in the United States. 

Margaret Valenti

Margaret Valenti is the Editor of Generation Z Voice at The Pavlovic Today.