To Increase or Not?
written by 20321 Yim Tae Hee
With the strong support of Democrats, the Biden administration signed for a $1.9 trillion COVID-19 relief bill in March. That stimulus package includes direct payments to Americans, financial support for local governments, and additional aid for COVID-19 vaccine distribution. Among those subsidies, raising the federal minimum wage is the most controversial part.
In the U.S., the federal minimum wage is the lower limit, and the states can make an adjustment on it. It usually reflects on the local economic situation of each state.
Republicans disagree with it
Since 2009, it has been $7.25 per hour but Democrats are trying to raise it to $15 by 2025. They drafted a bill for the reason of helping those who are below the poverty line, but Republicans have shown evident objection toward it.
Republicans state that it would negatively affect the small-business owners, thus causing enormous job loss. Increased federal minimum wage would make it even harder for small-business owners to afford the wage of their employees since they lack sufficient resilience and funding compared to bigger businesses. Consequently, a lot of people who are desperately seeking a job would find it more and more difficult to get one.
People’s reaction varies
Since the minimum wage is directly related to people’s livelihoods, especially those who are on the edge due to the pandemic, it is also a hot potato among citizens.
People who are in favor of increasing the federal minimum wage, especially the ones who work in commerce, say that raising the minimum wage would spur economic growth as it triggers consumption. The Federal Reserve Bank of Chicago economists predicted that an increase of $1.75 in the federal minimum wage would increase the household spending by $48 billion the following year. It is also as desperate as it could be since the economy is in a recession since the COVID-19 outbreak and no one ever knows when the economy will recover again. Furthermore, it would also provide direct aid for those who are under the poverty line because they would be able to manage their livings without working two or if worse, three part-time jobs.
However, those who are against the increase of the federal minimum wage argue that raising it would increase unnecessary layoffs, contributing to even more serious unemployment. According to the Congressional Budget Office, “a minimum wage increase from $7.25 to $10.10 would result in a loss of 500,000 jobs.” Beside the potential job losses, competition for getting a minimum wage job would be more intense, thus causing people to experience excessive stress and pressure. Last but not least, the most concerned issue is about inflation. If the government raises the federal minimum wage, businesses will require higher cost for customers to afford the salaries of their employees. Naturally, the prices will go up, and people might think that there is nothing changed despite the enormous efforts of the government.
All these possible consequences are not negligible. So whether to increase the minimum wage or not seems to be a tough decision since both sides have their own pros and cons.
Disputes seem to continue
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