Pros and Cons of Raising the Minimum Wage

The topic of raising the minimum wage is one that has solid, passionate supporters on both sides. Ever since President Obama mentioned raising the minimum wage in his 2014 State of the Union Address, debates have been going back and forth. President Obama’s objective was to raise the minimum wage from $7.25 per hour to $10.10 per hour – an increase of more than 40%.

Supporters of this legislation claim that the primary benefit of a minimum wage increase would be a boost to the economy and would result in no loss of jobs. However, opposition firmly believes that this level of increase would hurt minimum wage employees and cause 500,000 fewer available jobs. To only further complicate the debate, many states already have their own set minimum wage.

Surely, both sides of the debate cannot be correct? What are the pros and cons of raising the current minimum wage? You will find a few major ones listed below. You be the judge.


1. Boost the Economy

If minimum wage workers are receiving more in compensation, it is only reasonable to assume that they will, therefore, have more money to spend. This increase in consumer spending will help to boost the current economy.

2. Increased Job Opportunities

As minimum wage employees spend more on goods and services, some businesses will need to hire additional employees to compensate for the increase in sales.

3. Reduced Reliance on Social Programs

A good portion of the people who heavily rely on state and federal social programs are quite often those on minimum wage. 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. This would then, in turn, lead to either lower taxes or a reallocation of the current funds to other, more-needed programs.

4. Increased Retention Rate

When employees are happy with their wage, they are more likely to continue their current employment. This would be the case if the minimum wage were increased. Workers would be less likely to quit and look for a better job elsewhere. This improved retention rate benefits employers, as they will lose less in funds needed to hire and train new employees.

5. Offset Inflation

Inflation directly affects the economy and the cost of goods and services that are needed by minimum wage employees. Inflation occurs every year, yet the minimum has only been raised three times in the last thirty years. Some type of minimum wage increase is needed to offset this inflation.


1. Increased Layoffs

Those employers who already have a very low-profit margin and wage budget would be directly and negatively affected by a significant minimum wage increase. 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. Even though a higher minimum wage would mean that some employees would be making more, it also would mean that some employees would be left without a job altogether.

2. Increased Cost for Goods

Some employers may attempt to offset their increased compensation budget by raising prices for their products or services. This directly affects the consumer negatively and could have a ripple effect on the economy, resulting in a slightly higher cost of living. In turn, another need for increased minimum wage would appear, only perpetuating the cycle.

3. Limited New Hires

In a recent study held by a Federal Reserve Bank of Chicago, “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. Another detrimental response some business may have would be to merely outsource their jobs to other countries in which employees are willing to work for much less. This would result in fewer available jobs for American workers.

4. Fewer Jobs for New Workers

With a significant minimum wage increase, some experienced workers will lose their current jobs and will 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 gravitate towards minimum wage jobs.

While raising the minimum wage could be very beneficial, it is clear that there are also a lot of negatives 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 inevitable. Where do you stand on the matter? Would your business be okay if the minimum wage were increased? It’s always a good idea to have a plan in place and make sure that your business would still thrive even if a new minimum wage were implemented.

Similar Posts