The Real Effects of Raising the Minimum Wage

On Friday the federal minimum wage increased $0.70 to $7.25 an hour. This is the third and final stage of the Fair Labor Standards Act approved by congress in 2007 that increased the minimum wage from $5.15 to $7.25. The latest increase is expected to affect 2.8 million workers in the 31 states without a state mandated minimum wage higher than $7.25.

The supporting argument for raising the minimum wage is to increase the standard of living of the poor and to stimulate the economy through an increase in spending. Opponents argue that it increases unemployment and inflation and it does not achieve its stated goals. Unfortunately there is no decisive evidence that convincingly supports the pros or the cons of raising the minimum wage. Practically speaking, a business owner would oppose these increases. Cost of labor increases without any increase in productivity. So whether or not this will increase unemployment or improve the standard of living for the poor, it will hurt the bottom line of all businesses with minimum wage earners at a very inconvenient time. It would be advantageous to postpone the latest increase until the job market has normalized.

Pro Arguments - Economic Policy Institute
Con Arguments - Employment Policies Institute

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