Picture this: You are McDonald’s. You pay all of your employees $7.50 an hour. Then, all of a sudden, you are forced to pay them $15 an hour, because the minimum wage was just increased. Now you have to pay each employee twice as much as before. You have two options: Do not cut any employees, and pay more out of your profit, or keep your current profit and fire half of your workers. Either you lose a lot of money, or make many people lose their jobs. That sounds unfair, does it not? After all, this should help people rise out of poverty, and making them lose their jobs certainly will not help reach their goals.
Despite this, whether the government should increase minimum wages is an extremely debated topic because many people hold various opinions on the issue. Many people argue that increasing minimum wage will help lift people out of poverty and support the economy. Conversely, equally as many people say that increasing minimum wage would destroy small companies, bring down the economy, and might not even affect the poor. Minimum wage should not be increased, and other solutions to poverty should be put in action instead.
One reason minimum wage should not be increased is that if the minimum wage was raised, the employers would eventually have to either pay more of their profit or fire many of their employees. Obviously, the average employer would choose to fire their employees, because they need their money. This would lead to many of the people working at low-income places to lose their jobs. “The Congressional Budget Office released a mixed-bag analysis in 2014 that found that adopting a $10.10 minimum wage nationwide would lift 900,000 people out of poverty while eliminating 500,000 low-income jobs.” (Newsela, Issue Overview: Minimum Wages, The Background). Furthermore, this would also probably lead to businesses decreasing in profits, since employers would have fewer people working for them, causing them to all have to do more work. If the employees were requested to do more work, they would probably want a raise, which would lead to employers paying even more out of their profit.
On the other hand, if employers do decide to pay more to their employees and not fire any of them, in order to keep the same profit, the employer would have to raise the prices of the products and goods that he or she is selling. “When Oakland’s minimum wage jumped from $9 an hour to $12.25 in March, shoppers noticed many stores added a dime or a quarter to different items. Food caterer David Smith raised the price of his dishes by $2 to $3 a plate. “I had to,” says Smith, 35, who has three employees.” (Newsela, With minimum wage rising, is America ready for $15-an-hour working world?, More Pay, Less Government Aid). If this happens, many of the employees who have attained a higher wage may not actually obtain a boost out of poverty. For instance, if you were working hourly for a ten-dollar wage, and it has just been raised to fifteen dollars per hour, you get more money. On the other hand, the cost of the products that the employee spends money on would be raised, too, so the extra money that the employee earned would essentially be spent on the extra cost of the products, leaving the employee with no extra money.
Also, many studies show that employees who are affected by the increased minimum wage are not actually poor. So, basically, if the minimum wage were to be raised, employees would just be paying normal people who are not in poverty extra. According to Jordan Yadoo from Bloomberg, “the minimum wage is an inefficient tool for poverty relief because so many of its beneficiaries, such as teenagers and part-timers, aren’t poor.”
(Newsela, Issue Overview: Minimum wages, The Argument). In this case, instead of paying the employees who are actually struggling with poverty extra, the employers are forced to pay all of his/her staff extra, when most of them do not even need extra cash, because, like mentioned above, they are not struggling with poverty.
On the other hand, some experts also argue that if the minimum wage was increased, the poverty rate would decrease drastically. Undoubtedly, if the minimum wage were to increase to fifteen dollars per hour by tomorrow, many people suffering from poverty would certainly fare much better. Although this may be true, it is not a reliable tool to decrease poverty, because, as stated above, if minimum wages were raised, then either the employer(s) would have a lower profit, or many of the other employees would have to be fired, which would lower the poverty rate even more. “An important economist said one of out of 10 or 20 of low-wage earners would lose their jobs.” (Newsela, California’s lowest-paid workers could soon get a raise, Some Workers Will Lose Their Jobs). Also, the income inequality gap would rise exponentially, because the workers who were fired would be even deeper in poverty, while the employees who were not fired would earn a lot more, causing the gap between those two categories to grow larger.
The issue of minimum wage is viewed very differently by many different types of people. It is obvious that increasing the minimum wage could help with employees with lower wages deal with poverty. But the negativities of this are lashed onto others, such as the employers or other employees. Instead of increasing the minimum wage, the solution should suit the needs of everyone. For example, if the government lent out more government aid, perhaps people in poverty could obtain a year or two of education and find a better job opening.