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The Benefits to Raising the Minimum Wage

1042 words | 4 page(s)

Proponents in favor of maintaining current minimum wages in the United States argue that any such wage increases would hold dire consequences to businesses across the country and would not be good for our economy. It appears the opposite may actually be true as a minimum wage increase, either locally, state-wide, or mandated through the federal government may actually provide a boost to a sagging economy that has yet to rebound from the so-called Great Recession which began in 2009. However, any mention of an increase in the minimum wage is typically met by opponents with apocalyptic claims, as they argue that an increase would stall any economic gains for businesses, have a negative effect on productivity and would be detrimental to the economy as a whole. However, raising the minimum wage would actually be positive for business, increases employee retention and work performance, and is beneficial to to our local and national economies.

If raising the minimum wage was so bad for businesses then why would over a thousand business owners, some of them leaders of large corporations such as Costco and Addus Health Care, argue in favor of it? In an online article published by The National Employment Law Center, both executives as well as business owners argued that raising the minimum wage was a positive thing for everyone, “[H]igher wages benefit business by increasing consumer purchasing power, reducing costly employee turnover, raising productivity, and improving product quality, customer satisfaction and company reputation.” (“The Business Case for Raising the Minimum Wage.”) Their position on this issue may be more than a bit pragmatic as well as for the sake of self interest, because what these business leaders probably recognize is the majority of minimum- and low-wage earners in this country work for large corporations. According to an online article published in the monthly periodical The Nation, “…66% of low-wage workers in the United States work at corporations with over 100 employees.” (Cunningham-Cook) Perhaps many business leaders are now beginning to appreciate the notion that employees are also consumers of their goods and services.

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Various recent studies have shown that raising the minimum wage is an extremely positive way for businesses to increase employee productivity while reducing turnover. A 2003 study found that a raise in the minimum wage for security screeners at the San Francisco Airport, from $6.45 to $10 hourly, had the effect of improving employee performance, morale and customer service. The study also reported a decrease in disciplinary issues as well as a reduction in employee turnover (“The Business Case for Raising the Minimum Wage”) Subsequent studies undertaken throughout 2005 and 2006 concurred, finding that increasing minimum wages had the effect of significantly reducing employee turnover, which plagues certain industries in fields such as fast food and retail (“The Business Case for Raising the Minimum Wage”). Such positive results still do not dissuade the arguments coming from those who oppose a raise, as they continue to cite its negative impact that it will have on consumer prices because businesses would be forced to offset the costs associated with higher wages. Yet, another study conducted by the University of California, Berkeley found that a price hike associated with raising wages would be relatively minimal, especially in the fast food and retail sectors, estimated to be 4 percent (Hiltzik).

One of the primary reasons the federal government mandated a national minimum wage was to stimulate an national economy slowed by The Great Depression which lasted throughout most of the 1930s (“Minimum Wage as Economic Stimulus”) It may surprise some that the same intention holds true today. The Federal Reserve Bank of Chicago has found that even a dollar increase to the minimum wage equals an increase in annual spending per household of $2800. The Economics Policy Institute argues that such increases in the minimum wage are a yearly boon to the national coffers. For example, if the national minimum wage would have been increased in 2011 to $9.50 per hour consumer spending would have injected an estimated $60 billion into the economy by now (“Minimum Wage as Economic Stimulus”). Based on this information it is very difficult to understand the resistance to raising the minimum wage across the country, as it almost seems patriotic to do so. In fact, grass-roots efforts continue to spring up throughout the country in order to galvanize support for a minimum wage increase. These efforts are buttressed by people such as Senator Tom Harkin, who introduced a bill that would have increased the federal minimum wage to $9.40 an hour in 2014 (Cunningham-Cook). Support has also come from unlikely quarters as well as even billionaire investors, such as Eli Broad, recognize the benefit of raising the minimum wage, arguing that by doing so local economies share in profits from sales that would not have been forthcoming otherwise (Hiltzik).

As has been shown, a raise to current minimum wage structures in this country are quite beneficial to employers and the economy as a whole. Maintaining lower wages has a detrimental effect on employee turnover rates as well as work performance. This appears to be the case as scores of research has proven. Providing workers with higher wages provides an incentive to remain on the job and to perform more optimally. From a business perspective both would appear to fit in quite nicely with a profit motive as they offset any price considerations related to the increase in wages. One of the main intents of a minimum wage, and subsequent increases, was to motivate consumer spending in order to boost slow economies. It would seem that such an increase is greatly needed today. Increasing minimum wages, while needed by low-wage workers, is a boon to small and large business throughout the country, and can be used as a remarkable economic tool as well.

    References
  • Cunningham-Cook, Matthew. “Activists Around the US Fight to Raise the Minimum Wage.”
    The Nation. The Nation Company, 20 Aug. 2012. Web. 10 Oct. 2014. .
  • Hiltzik, Michael. “Los Angeles Joins the Local Movement to Raise the Minimum Wage.” Los
    Angeles Times. Los Angeles Times, 2 Sept. 2014. Web. 10 Oct. 2014. .
  • National Employment Law Project. “The Business Case for Raising the Minimum Wage.” Raise
    The Minimum Wage. National Employment Law Project, n.d. Web. 10 Oct. 2014. .
  • National Employment Law Project. “Minimum Wage as Economic Stimulus.” Raise The
    Minimum Wage. National Employment Law Project, n.d. Web. 10 Oct. 2014. .

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