When it comes to Paychecks, bigger equals better. Market forces help businesses land on the most appropriate pay rate based on the skills and experience needed for every job, but most countries around the world have a minimum wage of some kind. America is no different.
Here are Five Fast Facts on America’s minimum wage:
- ⏲️ The History - The first minimum wage was created in 1938 by FDR to help prevent exploitation of workers during the Great Depression (particularly children). Back then, it was $0.25/hour, and 25% of child workers were putting in more than 60 hours per week. The current federal minimum wage is $7.25 per hour.
- 💲 Right Now - At the moment, 30 states have a minimum wage above the federal rate. Five states have no minimum, and two have minimums lower than the federal rate. For those seven states, the federal rate applies to workers. You know it’s bad when the fed rate is a step up!
- 👍 The Pros - A higher minimum wage obviously is good for those workers, not only to provide a better income for their families, but also to improve morale (which makes them even more productive) and help businesses retain good employees. They will, in turn, spend more into the economy, and likely invest in more education and training, which continues to raise their pay rate. Upward spiral, right?
- 👎 The Cons - Most businesses don’t have huge profit margins, so a rise in wages translates to a rise in prices, which hurts everyone. It also usually ends in job loss since businesses will try to keep their labor costs the same overall, may go bankrupt entirely, or may outsource jobs to cheaper countries. Uh, downward spiral…?
- 🤔 Studying The Issue - It’s a tricky issue because there are so many factors involved. When detailed studies have been done, they usually show that a higher minimum wage was a win for low income workers, but an overall negative for everyone. Even for those workers making more per hour, they usually end up with lower hours or less consistent shifts, which results in lower monthly pay overall and causes problems in child care, schooling, and other aspects of work life balance. Hm, sounds like we’re solving the wrong problem. Or maybe not solving any problem at all.
🔥Bottom line: Ultimately, higher wages are a very good thing…if they come about for the right reasons. If they simply shift the same money from one person to the next, they don’t really improve the situation. But, wage increases from workers becoming more efficient through technology or training, or somehow providing greater value are sustainable and are a net benefit to everyone. THAT is what we should all want to see. A government proclamation doesn’t get it done. In reality, it might make things worse because money that could be spent on training and technology investments are instead forced over to those artificial wage increases.
What do you think of raising the minimum wage?
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