There are many movements that advocate for the raising of the minimum wage. Many people who are proponents for raising the minimum wage fail to understand or perhaps have a skewed outlook on the economics behind the minimum wage.

A minimum wage is the lowest amount of salary allowed by law and employers are obligated to pay employees the minimum amount set by governmental regulation. For years, labor unions, progressives, and branches of the Democratic Party have instigated the increase of minimum wages, and this has indeed caused changes in the legislation on both the Federal level and the local level. Of course, there is much debate that revolves around the increase of the minimum wage, many of which are led by the Democratic Party. The idea behind raising the minimum wage is so that people who are on the lower spectrums of society can be alleviated out of poverty by having higher wages.

The current Federal minimum wage is at $7.25 an hour, and there are prospects of States raising the minimum wage to $15 an hour.

The issue of raising the minimum wage is controversial, and it is frequently debated on both sides of the aisle. Proponents for the increase of the minimum wage believe that blue-collared workers must be treated fairly because they are a vital part of the economy. It is believed that there must be a fair minimum wage to combat discrimination against gender and race. They believe that there is a wage gap that must be bridged.

If minimum wages are increased, it would spark an increase in consumerism and consumption because people would have more money to spend.

This would then lead to the betterment in the quality of life for low-end workers and it will stimulate the economy. The increase in spending would allow companies to have an increase in revenue, and it would in turn hire more employees. This would then lead to a reduction in the unemployment rate. The crime rate would also cohesively fall as the unemployment rate decreases. Consequently, if the unemployment rate decreases, so would the poverty rate, and people will no longer be in desperation because there would be less reasons to participate in criminal activities. With people out of the poverty line, the cost of welfare, Medicaid, and other forms of governmental assistance could be reduced, and this would lead to a surplus in the budget. The surplus could then be used for infrastructural development, which could create employment, improve the standard of living, and further boost the economy. These proponents would suggest that this creates a strong moral case for the raising of the minimum wage, and it is a basic social responsibility to advocate for it. I beg to differ.

In reality, however, raising minimum wages have not led to the preceding results.

Those who advocate against the minimum wage say that it would stifle the economy and create inflation. There would always be a wage gap, and that is a fact. A janitor will not be paid the same amount as an engineer. This is because a janitor is not qualified to do the work of an engineer, and thus would not be paid the same amount.

Therefore, skilled workers will not be paid the same amount as unskilled workers.

Skilled workers are definitely more valuable, and consequently, their pay will rise if the minimum wage rises. Now, the argument against the raise is that if wages are raised, the cost of living would also increase. With the increase of cost, companies would lay off workers, and increase prices in order to make up for losses. This causes a decline in the demand for all jobs in general, and it would actually hurt not just low income workers, but skilled workers too. The biggest anti-poverty program is employment, and in order to make the economy inclusive, there must be employment. The problem with saying that raising the minimum would decrease poverty, is that a good portion of poor people are jobless, and they live on government welfare. So raising the minimum wage really just decreases their chances of employment.

Also, because of the increase of cost, prices would go up and this will be a problem that affects everyone, because it eventually leads to higher inflation rates. According to the Heritage Foundation macroeconomic model, the increase of the minimum wage would hurt the economy and that the GDP would decline by about $42 billion in 2017. This would cause a significant reduction in employment which would not be beneficial for the overall economy. William Dunkelberg, a chief economist for the National Federation of Independent Business, argued that if increasing the minimum wage works so well, why not increase it to $50 dollars an hour? This would obviously be detrimental to employment, and is but a matter of degree. Money is not made from thin air, and there is an economic process to it. The increases of the minimum wage results in the loss of profit for employers, and the loss of jobs for workers. So instead of helping reduce the poverty rate, this creates an even greater gap than before because of the contraction in the economy.

Let’s do a brief comparison of between states:

California is one of the first few states to consistently raise the minimum wage in the last decade. Meanwhile, Texas does not have a state regulated minimum wage, and it adheres to Federal minimum. Now, there are some that say that Texas has one of the highest poverty rates in the country. Well, there are many contributing factors to that, but I would say that the model used to scale poverty cannot be applied equally to all the states. For example, a dollar could be stretched much more in Texas, as compared to California or Washington. Even though the minimum wage is lower, the spending power might be higher. States with higher minimum wages do not always have higher relative salaries. According to the Texas Workforce Press Release, the unemployment rate dropped to a record 4.1% in August, 2015, which is well below the national rate.

The reasons politicians want higher minimum wages do not correlate with improving the economy or eliminating poverty.

It is to score political points, and to gain support from people who are not aware or educated about the structure of the economy and how economics works. It is important to raise awareness of the economic disaster that could very well occur to Texas, like they did in Washington and parts of California, if the minimum wages are raised disproportionately. There are many millennials who have the attitude that the world owes them something and they live in a bubble thinking that they will get paid well for doing “what they like.” No, you won’t! If you want to do well and have a good job, pick a degree that is able to yield good income and is sustainable. Don’t complain about low wages are if you have picked an irrelevant degree.

In conclusion, the minimum wage must have a parallel synchronization to the economy, and if it is suddenly increased, it will tip the economic balance, and cause unwanted problems. It is important for the minimum wage status quo to be maintained, because disproportionately raising the minimum wage will create a lose-lose situation for everyone in all spectrums of society, and there must be rationale in the decisions made in order to create economic sustainability and prevent corporate inversion and hyperinflation.