Minimum wage hike may cause harm, not good

Minimum wage.

The words that often appear when someone starts to criticize the American government.

Truly, it is a touchy subject, often misunderstood even when explained correctly. There are many underlying factors to the fluctuation of minimum wage over the years: politics, differing economic ideologies and other fundamental disagreements.

Yet the heart of the problem lies with general public misconceptions of the actual effects of minimum wage.

Many believe that raising the federal minimum wage would increase the standard of living for poor workers. $15 an hour as the minimum base wage sounds seductive, almost unrealistic for the average worker.  Or is it?

According to a 2012 study by former Deputy Assistant Secretary of the U.S. Department of Labor Mark Wilson, raising the minimum wage does not actually benefit the demographics it aims to. When the federal minimum wage was raised from $5.15 to $7.25, only 15 percent of workers, which the raise was targeted to support, lived in poor households.

Now, the term “poor” is subjective, and data could be skewed, but according to the U.S. government, any single person who makes less than $11,770 a year is in poverty. A full-time worker lays out 2080 hours a year at their job. With the current minimum wage, they earn $15,080.

But this only affects those who have jobs that pay minimum wage. Most are teenagers, part-timers and college students, who are often still financially dependent.

Again, does that mean we should let those who earn such low incomes stay that way? By no means. But if our true intention is to support them, raising the minimum wage too much would hurt them.

While the years following the recession of 2007 have been tumultuous for the job market, the burden has lightened, and the economy has somewhat stabilized. But will raising the minimum provide more jobs?

In fact, according to a 2010 study by Michael J. Hicks, the opposite occurred the last time Raising the federal minimum wage caused around 550,000 total part-time jobs to disappear, including 310,000 part-time jobs for teenagers. Imagine the chaos if the minimum was raised to $15, especially for college students.

People like former U.S. Secretary of Labor Robert Reich who support the wage increase to $15 have a valid point when they say that the raise does not need to be effective immediately. Reasonably, the increase would have to be over a period of time, so that smaller companies have breathing room.

Yet these same people are making assumptions that raising the minimum would bolster our economy by encouraging consumers to spend more. On the basis of that statement, raising minimum wage even higher than $15 would spur higher consumption, thus increase the strength of our economy.

So why hasn’t it happened yet?

Because the value of less skilled workers would decrease even further, costing them jobs. Because it is impossible for smaller businesses to keep all their employees if such were to happen.

Because inevitably, the McChicken would no longer be your $1.20 go-to sandwich.

So then what needs to be done? The profits of owners have been rising while the median pay of the average worker has stagnated, with inflation in tow, and economic debates alone will not solve the problem.

Action needs to happen.

With this in mind, I want to see help to the workers of our nation. President Obama’s proposed $10.10 plan sounds reasonable, although it is still quite a significant increase.

I believe it may help the intended demographics, although the situation would need extreme caution and close monitoring to be successful.

But raising the minimum wage excessively would create more problems to solve, rather than fix the existing ones.