Pros and Cons of Raising the Minimum Wage in The US

Raising the Minimum Wage

Raising the minimum wage can benefit employers and small businesses in a few ways.

It is important for a stable economy and addressing income inequality.

It’s not just about adjusting money; it shows a commitment to workers’ well-being.

Raising the minimum wage helps employers and small businesses in several ways,

  • Improved Employee Retention: By offering higher wages, businesses can attract and retain talented employees, reducing turnover costs and maintaining a stable workforce.
  • Increased Productivity: Fair wages motivate employees to work harder and contribute more to the business’s success, improving efficiency and performance.
  • Encouraging Spending: When low-wage workers earn more, they have more purchasing power, stimulating demand for products and services that benefit businesses and help the economy grow.
What Is The Federal Minimum Wage in The US?
In 2024, the lowest pay allowed by the US government stays at $7.25 per hour.

The rate of $7.25 per hour has persisted since 2009 without any adjustments for inflation or changes in the cost of living. 

Each state has the right to set their own minimum wage, which might be higher to match local living costs.

People debate whether the federal minimum wage is enough to support workers and their families. 

Some opponents say it’s too low to cover expenses, while others argue that increasing it would make low-paid workers live better.

What Are The Local Minimum Wages In Each U.S. State?

united states map
StateMinimum WagePremium Pay After Designated HoursSpecial Minimum Wage
Alaska$11.73Daily – 8, Weekly – 40Voluntary flexible work hour plan
American SamoaSpecial ratesSpecial ratesYes
Arkansas$11.00Weekly – 40None
California$16.00Daily – 8, 12; Weekly – 40None
Colorado$14.42Daily – 12, Weekly – 40Retail, service, commercial support service, food and beverage, health and medical industries
Connecticut$15.69Weekly – 40Restaurants, hotel restaurants
Delaware$13.25NoneAdopts federal rate
District of Columbia$17.00Weekly – 40None
Florida$12.00NoneAnnual adjustments
Guam$9.25Weekly – 40None
Hawaii$14.00Weekly – 40Guaranteed monthly compensation exemption, domestic service workers
Illinois$14.00Weekly – 40None
Indiana$7.25Weekly – 40None
Iowa$7.25NoneEqual to federal if lower
Kansas$7.25NoneExcludes from FLSA
Kentucky$7.25Weekly – 40, 7th day7th day overtime law
Maine$14.15Weekly – 40Federal rate adjustment
Maryland$15.00Weekly – 40None
Massachusetts$15.00Weekly – 40$0.50 above federal
Michigan$10.33Weekly – 40Excludes from FLSA
Minnesota$10.85Weekly – 48Annual adjustments
Missouri$12.30Weekly – 40Exemptions, seasonal amusement businesses
Montana$10.30Weekly – 40Gross annual sales
Nevada$10.25-11.25NoneAnnual adjustments
New Hampshire$7.25Weekly – 40Equal to federal if lower
New Jersey$15.13Weekly – 40$13.73 for seasonal/small employers
New Mexico$12.00Weekly – 40None
New York$15.00-16.00Weekly – 40Hospitality regulations, rest periods
North Carolina$7.25Weekly – 40Seasonal amusements
North Dakota$7.25Weekly – 40None
Northern Mariana Islands$7.25Weekly – 40None
Ohio$7.25-10.45Weekly – 40Gross receipts
Oklahoma$2.00-7.25NoneExcludes from FLSA
Oregon$13.20-15.45Weekly – 40Premium pay for specific industries
Pennsylvania$7.25Weekly – 40None
Puerto Rico$9.50Daily – 8, Weekly – 40, rest dayFederal minimum wage applies to certain employees
Rhode Island$14.00Weekly – 40Sunday and holiday pay
South CarolinaNoneNoneNone
South Dakota$11.20NoneAnnual adjustments
Texas$7.25NoneExcludes from FLSA
Utah$7.25NoneExcludes from FLSA
Vermont$13.67Weekly – 40Federal rate replacement
Virgin Islands$10.50Daily – 8, Weekly – 40, 6th/7th dayNone
Washington$16.28Weekly – 40Compensating time off
West Virginia$8.75Weekly – 40None
Wisconsin$7.25Weekly – 40None
Wyoming$5.15NoneExcludes from FLSA

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What Is The Importance Of Raising The Minimum Wage For US Employees?

The importance of raising the minimum wage can have a significant impact on your US-based employees as it, 

  • Provides financial stability to employees, leading to higher job satisfaction and morale.
  • Encourages employee retention, reducing recruitment and training costs for businesses.
  • It enhances productivity as employees are more motivated to perform well.
  • Promotes a positive work environment, improving overall company culture.
  • Strengthens the purchasing power of low-wage workers, boosting local economies.
  • Demonstrates corporate social responsibility, which can attract customers and investors.

Is Minimum Wage Meant To Be A Living Wage Or A Starting Wage in the US?

The debate over the purpose of the minimum wage in the US centers on whether it should function as a living wage or merely as a starting wage for entry-level positions.

Advocates argue that the minimum wage should provide workers with enough income to cover basic living expenses, such as food, housing, and healthcare. 

They contend that in a country as wealthy as the United States, no one should have to struggle to make ends meet while working full-time.

With full-time workers earning just $15,080 annually, below the poverty line, the minimum wage needs to meet basic needs.

On the other hand, opponents argue that the minimum wage is intended to be a starting wage, primarily for entry-level positions or temporary work. 

They assert that increasing the minimum wage too drastically could lead to job losses, particularly among small businesses, as employers may not be able to afford higher labor costs. 

Additionally, they argue that raising the minimum wage could lead to inflation, as businesses may pass on the increased costs to consumers through higher prices for goods and services. 

Ultimately, the question of whether the minimum wage should be a living wage or a starting wage is a complex issue with economic, social, and political implications.

Is Minimum Wage The Same For All US Workers or Employees?

The minimum wage in the US varies by location, industry, and type of employment. 

While the federal minimum wage is $7.25 per hour, many states and localities have established their minimum wage rates, which can be higher than the national standard.

Additionally, certain categories of workers, such as tipped employees and minors, may be subject to different minimum wage requirements. 

Different places in the United States have rules about how much someone should be paid, at least for their work. 

Thus, this shows how labor laws can be complicated and different depending on location.

Why Are State Minimum Wages Different?

United States Map and Satellite Image

State minimum wages vary due to several factors, including cost of living, economic conditions, political inclinations, and state legislation. 

States with higher living costs tend to set higher minimum wages to ensure workers can afford necessities. 

Research indicates that since 1991, political leanings have been the primary determinant of differences in state minimum wage laws. 

This suggests that states with varying political ideologies are more inclined to adopt different minimum wage levels. Interestingly, the cost of living within a state does not seem to significantly influence its decision to increase the minimum wage above the federal level. 

Despite proponents citing the rising cost of living as a justification for wage hikes, the data suggests otherwise.

This finding is particularly noteworthy for economists analyzing labor cost trends among states where employers operate or plan to relocate. 

Understanding the interplay between political ideology and economic factors is crucial in comprehending why state minimum wages differ across the United States. 

It underscores the complexity of policymaking at the state level and highlights the importance of considering political dynamics when discussing minimum wage legislation. 

Consequently, any discussion on raising the minimum wage must acknowledge these diverse influences to formulate effective policy solutions.

Economic factors such as unemployment rates and GDP growth also influence minimum wage decisions. 

Additionally, some states have minimum wage laws to address specific problems in the job market or focus on certain issues. 

Each state’s minimum wage reflects the diversity of the economy and society across the United States.

The Pros and Cons of Raising the Minimum Wage

Examining both sides of raising the minimum wage helps us understand how it might affect different groups of people.

Pros Of Raising The Minimum Wage

1. Increasing Consumer Spending

Increasing the minimum wage stimulates consumer spending as low-wage workers have more optional income to spend on goods and services.

consumer spending

With higher wages, workers can afford to purchase more items, increasing demand for products across various industries.

Higher consumer spending contributes to economic growth by boosting business sales and revenue, which may result in job creation and expansion opportunities.

2. Increasing Federal Revenues

Increasing the minimum wage can lead to higher federal revenues through various channels. 

Business owners, hourly workers, and wage earners stand to benefit from the Raise the Wage Act of 2021, which aims to raise the current federal minimum wage. 

This act, supported by congressional leaders and the Congressional Budget Office (CBO), proposes adjustments to the Fair Labor Standards Act (FLSA), providing hourly workers with fair compensation reflective of the rising cost of living. 

By raising the minimum wage, the Department of Labor seeks to address disparities in family income and ensure that hourly workers in Washington, D.C., and across the nation receive adequate compensation for their labor. 

The bottom line is that increasing the minimum wage not only boosts the financial well-being of individuals and families but also generates additional revenue for the government, as evidenced by analyses conducted by the CBO. 

These protections afforded by the Raise the Wage Act serve to uplift wage earners and strengthen the economy, contributing to a more equitable society.

3. Increases Demand For Goods And Services

With higher wages, low-income households have more disposable income for essential items.

So, they tend to spend more and this increased spending can stimulate economic activity, benefiting businesses across various sectors.

Retailers, restaurants, and service providers may experience higher sales as consumers have more purchasing power.

Ultimately, this leads to a raise in the demand for goods and services required by the masses.

4. Better Quality Of Life For Minimum Wage Workers

Raising the minimum wage improves the quality of life for workers by ensuring they can afford necessities such as housing, food, and healthcare.

Better wages provide financial stability and security for workers, reducing stress and improving overall well-being.

Improved living standards allow workers to participate more fully in society, contributing to economic growth and stability.

Eventually, raising the minimum wage promotes social equity and helps address income inequality by providing workers with a fairer share of economic prosperity.

5. Increased Workplace Productivity

Increasing the minimum wage can increase workplace productivity and improve employee retention rates.


Better compensation motivates workers to stay with their current employer, reducing turnover and associated costs.

Employees who feel adequately compensated are more likely to be engaged and committed to their work, resulting in increased efficiency and output.

Enhanced productivity contributes to business growth and market competitiveness, as companies benefit from a skilled and stable workforce.

As a result, businesses may experience fewer absenteeism and tardiness issues, as employees are more prepared to show up and give their all.

6. Boost the Economy

Raising the minimum wage not only benefits workers but also has a positive impact on the overall economy. 

When minimum-wage workers are paid more, they spend the money on groceries and services. This boosts demand for products, helping businesses sell more and grow.

This increase in consumer spending will help boost the current economy

It will bring in more tax money for the government, help build better roads and schools, and lift communities by improving people’s lives.

It enhances overall efficiency and reduces absenteeism, making businesses more competitive and productive.

7. Increased Job Opportunities

When the minimum wage goes up, workers have more money to spend. 

They tend to buy more things like food, clothes, and services, which boosts business sales.

Businesses often need more workers to meet the demand when they sell more.

They might hire more people, creating more job opportunities for those looking for work. 

Raising the minimum wage can help businesses grow and create more jobs.

8. Reduced Reliance on Social Programs

A good portion of the people who heavily rely on state and federal social programs are often those earning minimum wage. 

Social Programs

Due to their low income level, they must seek financial assistance through social programs to support themselves and their families. 

If the minimum wage were to be increased, some of these workers would not need to rely so heavily on social programs for support as it can help lift people out of poverty.

It’s good for low-wage workers because it helps them become more financially independent, and in the long run, it helps the economy by reducing the amount we spend on government aid.

However, this would lead to either lower taxes or reallocating current funds to other, more needed programs.

9. Increased Retention Rate

If the minimum wage were increased, employees would be happier with their salaries and more likely to continue their current employment

Workers would be less likely to quit and look for a better job elsewhere. 

The improved retention rate benefits employers, as they will lose less money needed to hire and train new employees. 

Moreover, a stable workforce contributes to heightened organizational productivity and efficiency, ultimately fostering overall business success.

Thus, by providing adequate compensation, employers can enhance job satisfaction and loyalty among their workforce, resulting in a mutually beneficial relationship where both parties succeed.

10. Offset Inflation

Inflation affects the economy and the cost of goods and services that minimum-wage employees need.

Inflation occurs yearly, yet the minimum has only been raised three times in the last thirty years. Some minimum wage increase is needed to fight against inflation.

One way to offset inflation is by increasing the minimum wage. 

When people who earn low wages get paid more, they can afford to buy more things, which helps them feel less stressed about money and live better lives. 

Also, when people have more money to spend, it helps the economy grow, which can help balance the effects of inflation.

Cons Of Raising The Minimum Wage

1. Increased Layoffs

A significant minimum wage increase would directly and negatively affect those significant increases and create problems for businesses that already make little profit. 

Pros and Cons of Raising the Minimum Wage

They will no longer be able to employ the same number of employees at the higher wage rate and will be forced to lay off some employees to continue to make a profit and stay within their compensation budget. 

However, Layoffs could disproportionately impact low-skilled or inexperienced workers the most. 

Additionally, companies that make little profit, such as small businesses or some industries, might have to lay off workers when the minimum wage increases.

Companies might try other things to deal with the extra cost of higher wages, like using automated machines instead of people or finding ways to do things more efficiently. 

2. Increased Cost for Goods (Higher Housing And Consumer Good Prices)

Some employers may attempt to offset their increased compensation budget by raising product or service prices.

It would directly affect the consumer negatively and could have a ripple effect on the economy. Because things cost more, there’s pressure to raise the minimum wage again, and the cycle continues. 

This can make it harder for people to afford what they need and increase economic differences between people, resulting in a slightly higher cost of living.

3. Limited New Hires

A recent Federal Reserve Bank of Chicago study states, “A ten percent increase in the minimum wage lowers low-skill employment by 2% to 4% and total restaurant employment by 1% to 3%.” 

Businesses that must compensate for an employee wage increase may not be able to hire as many new employees as they previously could since those funds are going back into their current employees.

This is due to increased business labor costs, which may lead to fewer new hires and even outsourcing jobs, especially for entry-level positions. 

It would result in fewer available jobs for American workers.

Although the goal is to improve workers’ lives, raising the minimum wage might make it harder for some people to find work and could worsen unemployment and increase unemployment in certain industries.

4. Fewer Jobs for New Workers (Decreasing Opportunity For Inexperienced Workers)

With a significant minimum wage increase, some experienced workers will lose their current jobs and then be forced to apply for minimum wage positions.

This results in a more competitive job market and fewer jobs, especially for new or inexperienced workers who usually move towards minimum wage jobs.

While raising the minimum wage could be very beneficial, it is clear that there are also a lot of contradictions that could happen as a result. 

With more jobs coming back or staying in America, those in economics expect that a minimum wage increase is still being determined.

5. Increasing Labor Costs And Unemployment

Increasing labor costs due to a higher minimum wage can pose challenges for businesses, particularly small enterprises.


When wages go up, businesses must spend more money on paying their workers. 

This can pressure their finances, especially if they make little profit.

As labor costs rise, some businesses may be forced to reduce their workforce to maintain profitability, resulting in unemployment for affected workers.

Job cuts can particularly impact low-skilled or entry-level workers, who may find it harder to secure employment opportunities if positions are eliminated due to increased wages. 

This is something that businesses and policymakers worry about when they consider raising the minimum wage.

6. Differences In Minimum Wage By State

Differences in the minimum wage from state to state can make things tricky for businesses with stores in different places. 

They must follow different laws and deal with different rules about how much they need to pay their workers.

Handling payroll becomes more difficult because businesses must pay their employees enough based on each state’s minimum wage laws.

When minimum wages differ across states, it can mean that workers doing similar jobs might get paid differently just because of where they work. 

This can make them feel unfair and unhappy; some might even quit.

If the minimum wage increases in some states, businesses might need to reallocate funds or charge more for their products. 

This could make competing with other businesses harder and make things more expensive for customers.

7. Restricted Working Hours

When the minimum wage goes up, some businesses might give employees fewer hours to work to save money. 

This can be a double-edged sword: while the hourly wage increases, workers may find themselves with reduced overall income due to the decrease in hours. 

Consequently, this situation not only impacts individual financial stability but also contributes to broader economic discussions around income tax policies and poverty rates. 

As workers grapple with the repercussions of decreased hours and potentially stagnant incomes, debates within Congress regarding raising or lowering the minimum wage gain significant traction. 

Businesses may argue for lower minimum wage thresholds to offset the costs of increased labor expenses, while advocates emphasize the importance of a living wage in reducing the poverty rate and improving overall societal well-being. 

Balancing these concerns requires careful consideration of the interplay between hourly wage rates, income tax structures, and their implications for addressing poverty at both the individual and societal levels.

8. Reduced Employee Benefits

Raising the minimum wage can reduce employee benefits, as businesses may offset increased labor costs by cutting back on perks such as health insurance, retirement contributions, or paid time off.

The reduction in employee benefits could make it hard for employers to offer the same benefits without spending too much money.

Further, reduced benefits can lead to decreased job satisfaction and employee morale, as workers may feel undervalued or disadvantaged compared to their previous compensation packages.

Raising the minimum wage could make it tough for businesses to keep their workers happy and stick around.

How To Handle The Effects Of Raising The Minimum Wage?

Businesses can employ several strategies to effectively handle the effects of raising the minimum wage. 

  1. Adjust the business model to attract more customers and increase revenue.
  2. Offer innovative value-added services or products that make customers want to come back.
  3. Explore automation opportunities to reduce reliance on human labor and lower overall costs.
  4. Optimize employee schedules to maximize productivity and efficiency.
  5. Consider working with independent contractors to lessen labor costs.
  6. Implement cost-saving measures such as reducing employee benefits or increasing prices strategically.

Does Inflation Impact Minimum Wage in the US?


Inflation in the United States affects the minimum wage sector. 

As prices for goods and services rise over time due to inflation, the purchasing power of the minimum wage decreases. 

Inflation makes it tough for low-income people to afford the things they need. 

If we don’t adjust the minimum wage to match price changes, it can be even harder for workers to afford necessities.

Consequently, with adjustments to keep pace with inflation, low-wage workers may be able to maintain their standard of living, potentially worsening income inequality and poverty levels.

Therefore, policymakers often consider linking the minimum wage to inflation rates is a good idea.

How Does Minimum Wage Affect Small Businesses?

Raising the minimum wage increases labor costs for small businesses.

It may lead to reduced hiring or layoffs as businesses try to offset increased expenses.

Small businesses may face difficulty competing with larger corporations with more resources to absorb higher labor costs.

Higher wages can benefit employees but may require small businesses to find innovative solutions to adapt without compromising their credibility.

With increased minimum wages, they may experience reduced absenteeism and higher employee engagement levels, resulting in smoother operations and better customer experiences.

Improved employee compensation can enhance the reputation of small businesses, attract top talent, and foster a positive company image.

Higher wages encourage employees to invest in their skills and education, potentially creating a more skilled workforce for small businesses.

How Can Businesses Prepare For A Potential Increase In The Minimum Wage?

  1. Evaluate Current Wage Structures: Assess the wages of existing employees to determine how many would be affected by a minimum wage increase.
  2. Review Operational Costs: Analyze expenses such as rent, utilities, and supplies to identify areas where cost savings can be achieved to offset higher labor expenses.
  3. Consider Pricing Strategies: Evaluate pricing strategies to determine if price adjustments are necessary to maintain profit margins while paying higher wages.
  4. Invest in Technology: Explore automation and technology solutions to streamline operations and reduce labor costs.
  5. Train and Upskill Employees: Invest in training programs to enhance employee skills and productivity, which can justify higher wages.

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How Does A Higher Minimum Wage Affect Employee Turnover?

A higher minimum wage reduces employee turnover rates by providing workers with better compensation, making them less likely to seek employment elsewhere.

Adequate compensation motivates employees to stay with their current employer, as they feel valued and fairly compensated for their work.

Lower turnover leads to cost savings associated with hiring and training, as businesses spend less time and resources recruiting and onboarding new employees.

A stable workforce cultivates efficiency and productivity within businesses, as employees are more experienced and invested in their roles, leading to improved overall performance and output.

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