Raising minimum wage can hurt local business

State Hornet Staff

Raising the federal minimum wage is always a very partisan issue whenever Congress introduces a bill to raise it. The consequences due to raising the minimum wage tend to be blown out of proportion by politicians on both sides of the debate; overall, it tends to be beneficial to those who work at that level.

In his State of the Union speech last February 2012, President Obama called on Congress to raise the federal minimum wage to $9 per hour.

The president also wants to link the minimum wage to the cost-of-living, or how much it costs to buy the basic necessities for survival. Linking the minimum wage to cost-of-living, something eight states already do, means it will increase as inflation rises, thereby helping to keep more people above the poverty line.

Raising the minimum wage will have a large effect on college students’ wages across the country. Economics professor Suzanne O’Keefe said, while only 6 percent of the labor force in 2010 works at minimum wage, a significant portion of minimum wage workers are teenagers. The Bureau of Labor Statistics backs this up by stating more than half of minimum wage workers are under 25.

O’Keefe said increasing the minimum wage could lead to an increase in wages, not just for those working at minimum wage, but also people who are expected to earn more than that rate. For example, someone earning $8.50 in California would earn slightly more than $9 should Obama’s plan come to fruition.

However, O’Keefe said that, in the short term, unemployment rates could temporarily increase when businesses find their expenses are rising. She went on to explain this will probably not be a problem in California. Since the minimum wage here is already at $8, it would have a smaller impact in California than in other states. Even in other parts of the country, she said the effects are usually small.

For large corporations, this likely would not be an issue, but for small businesses with tighter budgets, the increase in expenses could very well lead to reduced hours and – at worst – layoffs.

At entry-level positions, O’Keefe said there could be fewer available job openings, but that effect would also be reduced in California compared to other areas of the country.

In the long term, the increased expenses could lead to an increase in prices, O’Keefe said. If that happens, the economic recovery could slow down “if employers reduce employment as a result” of the wage increase.

Within the editorial board here at the Hornet, less than half of the editors work a second job outside of editing. However, of those editors who work a second job, they all earn at or slightly above minimum wage. Their quality of life would increase if the wage increase were to go through.

While it seems the consequences of a minimum wage increase would likely not be negative, it is clear both major parties in America believe otherwise and have made the issue into a hot button issue.

Unsurprisingly, Obama’s proposal lines up with the Democratic Party platform, in that the minimum wage should be raised and indexed to inflation. According to the party’s official platform, the policy is to facilitate “equal pay for equal work.”

On the flip side, the Republican Party platform stays silent on the issue of minimum wages within the States, but does reveal the party’s policy on a minimum wage within the American territories. The platform states territories should have the ability to choose their minimum wage, since a minimum wage “has seriously restricted progress in the private sector.”

Raising the minimum wage will likely improve the quality of life for people working at that level, especially if it was linked to inflation or cost of living. With the minimum wage dependent on an objective variable, politics are completely removed from the problem.

With the politics removed, any future minimum wage increases would be implemented far faster without either party bickering about what consequences could be.

Raising the minimum wage would increase the quality of living for a lot of students, especially when it can continue increasing as the cost of living increases.