Does America Deserve A Raise?

The potential effects of enacting President Obama's proposed minimum wage hike to $10.10 are discussed for the economy, employers, and workers.

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With an economy that is tentatively getting back on its feet, it only seems appropriate that minimum wage become a point of focus. Currently the federal minimum wage is $7.25 per hour, however, this may soon be a figure of the past.

“America deserves a raise,” stated President Obama to a Union crowd early in September and he intends to give it. President Obama has proposed to increase the minimum wage to $10.10 per hour by 2016. He argues that it would “help families,” and “it will give businesses customers with more money.” However, Republicans like John Boehner assert that, “when you raise the price of employment, guess what happens? You get less of it. And we know from increases in the minimum wage in the past that hundreds of thousands of low income Americans have lost their jobs.” 

According to economist John Schmitt of the Center of Economic and Policy Research, a $15 minimum wage is not as outlandish as some believe. In fact, if the minimum wage had kept up with productivity growth since it was first introduced in 1938 it would be close to $21.72, instead of the current $7.25.

This issue is not relegated to the floor of Congress or the executive wing of the White House however. Across the country, the issue is being raised in individual states and cases. Fast food workers are now fighting for $15 an hour and a union to protect their rights. Corporations like Costco, Gap Inc., Ikea, Whole Foods and Ben & Jerry’s have increased their wages, to boost productivity and reduce turnover.

Currently, twenty-six states have raised their minimum wages above the federal mandate. The Washington state minimum wage is now $9.32 and Seattle recently approved a bill for a $15 minimum wage by 2018. Massachusetts has also bolstered its minimum wage to $11 per hour. According to a Congressional Budget Office report done earlier this year, it was estimated that a minimum wage of $10.10 an hour could potentially cost the nation 500,000 jobs, but the empirical results in individual states are not substantiating this claim, according to some.

A study done by the Center for Economic and Policy Research on 13 states that have increased their minimum wage, suggests that these 13 states have had stronger employment growth than those that have not. The study was an updated version of a Goldman Sachs analysis, it included data from April and May and compared average employment during the first five months of 2014 with the last five months of 2013.

Schmitt, explains that increased minimum wage promotes employment growth, as it could “help businesses fill openings more quickly.” And typically large employers of low-wage worker almost always have job vacancies. He also adds that, “low-wage workers tend to spend nearly all their extra cash, lifting the local economy and creating more jobs”

Such optimistic outlooks on wage increases are not without contestation. The Employment Policies Institute explains that “as employers are faced with higher labor costs, they will hire workers who have more work experience or higher skill levels. This leaves unskilled applicants without a job, and without the invisible curriculum that comes with a first job experience.”

The Employment Policies Institute also reports that for every 10 percent increase in the minimum wage, teen employment at small businesses is estimated to decrease by 4.6 to 9.0 percent. And based on a recent U.S. census, “only 16.5 percent of minimum wage recipients are raising a family on the minimum wage while the remaining 83.5 percent are teenagers living with working parents, adults, or dual-earner married couples.” Thus, those seemingly benefiting most from minimum wage labor would be those hurt the most.

The issue of wages will not be answered easily, and the manufacturing industry should not be removed from the discussion. Recently, there have been reports of labor strikes, renewed interest in union powers and discussions of a potentially widening skill gap in manufacturing professions. Chris Fox, Editor of, wrote how it might not be a skills gap responsible for unemployment in the manufacturing sector. Instead, higher unemployment numbers could be accredited to disagreements regarding pay and compensation. He cites the New York Timessaying, “what employers describe as talent shortages are often failures to agree on salary.” 

So it doesn’t seem that the manufacturing industry as a whole is immune to the dissent around wages. In fact, in a survey of 245 engineers done by Product Design & Development, 56 percent of engineers feel they are overqualified or qualified to make more than they currently are.

So will these questions around minimum wage begin to cause stirs in the manufacturing sector as workers begin to feel they should make more? As employers or workers, have you experienced problems around agreeing to proper compensation?

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