Raising minimum wage: Do the pros outweigh the cons?
With the U.S. Senate potentially seeing legislation passed by the House to raise the wage to $15-an-hour, local leaders shared what effect it may have on the area.
At the argument’s core is deciding if it’s better to hire fewer workers at a livable wage, or more workers at a wage unsustainable.
Ron Frick, president of the Lycoming County United Way, said our area’s poverty levels will not be fixed with such a simplistic approach as trying to pay some workers more.
“Less and less people would have those jobs, and then we didn’t solve the problem,” he said.
If the employer has a limited budget to pull from to pay his employees, forcing the employer to spend more will mean that less people will hold those positions, said Frick.
The electorate being torn down the middle has stymied any progress moving either way, said Mehrdad Madresehee, an economics professor at Lycoming College, who added that there are good arguments either way.
What isn’t up for debate, however, is the fact that minimum wage is almost the lowest as it has ever been.
First instituted in 1938 at 25 cents, which was $10 in today’s money, the minimum wage reached its lowest buying power in July 2007, which calculated for inflation, was $7.22, said Madresehee.
“In few years, if you keep it at $7.25, even in Williamsport no one is going to be able to hire anyone at that rate,” he said. “We will have let it bleed to death.”
At that point in time, minimum wage will become so low and unsustainable that no one will take that job and employers will have to pay more.
Originally put in place to support those who couldn’t engage in collective bargaining, the minimum wage now needs to find the market equilibrium, or the balance between what people are willing to be paid for their labor and what business can reasonable hire them at.
There are several lesser known factors at work, according to Madresehee.
“If it becomes too expensive to hire workers, companies might go in and automate at a faster rate, and you can lose jobs,” he said. Alternatively, employers may speed up the rate of globalization, or sending jobs overseas and across borders where labor is cheaper.
Additionally, those just entering the workforce or switching to a new one will face a higher bar of entry, said Madresehee. If someone’s work isn’t worth more than $15 dollars an hour to the employer, they cannot negotiate for a lower wage.
On the positive side, however, those who stay with the business are more likely to be trained to pick up the slack of those who have left or unable to participate in the work, he said.
But having fewer workers won’t necessarily mean a more expensive end-product. If the minimum wage is brought up slowly in such a way that won’t shock the economy, those who earn more will spend more on products and create more jobs in that sector, according to Madresehee.
Currently, some companies are paying such a low-wage that the government subsidizes their workforce.
“If your company is not paying you enough, you become eligible to get food stamps, then it’s taxpayers supporting you instead of you receiving a living wage from the company,” he said.
For Lycoming County commissioners Jack McKernan and Tony Mussare, the consequences far outweigh the benefits.
“Increasing the minimum wage will just put more pressure on all employers,” said McKernan, who also owns Williamsport Moving Co. “With basically full employment right now there is a lot of upward pressure on employers.”
Many businesses are already paying far more than the minimum wage for quality workers, he said.
Raising the minimum wage will also force employers to raise the wages of those workers making close to the new minimum, said Mussare.
“(It) will put people out of work and close down many small business,” he said. This paired with more online shopping, “Brick and mortar businesses will go under, placing more pressure on property taxes.”