Fear towards the implementation of a $15 minimum wage

Fear towards the implementation of a $15 minimum wage

The debate surrounding the minimum wage in the United States continues to be a hot topic, with varying opinions from economists, policymakers, and industry leaders.

According to a study by University of California, Berkeley professors, increasing the minimum wage could help reduce the persistent earnings divide between white workers and Black, Hispanic, and Native American workers. However, it's important to note that there will be associated price increases, as stated by Dale Belman, a professor with Michigan State University.

As of this year, 27 cities and counties have adopted a minimum wage of $15. Approximately 30% of retail workers would be directly affected by such an increase, with another 8.5% feeling indirect effects, according to an analysis by the Economic Policy Institute in 2019.

Some retail giants, like Costco, have adapted to higher wages by becoming more efficient. For most retail businesses, a minimum wage increase to $11 would only impact 5% of their operating profits, which could likely be made up with price increases. However, at Kohl's and Macy's, the profit decrease from a $15 minimum wage is larger than 25%.

The National Retail Federation (NRF) and the Retail Industry Leaders Association (RILA) have remained relatively quiet on the proposal for a $15 minimum wage during the recent Democrat-led Senate's stimulus discussions. Despite this, a large number of their members may support raising the wage, but the appropriate level of increase remains unclear.

The Senate's parliamentarian has blocked a hike of the minimum wage to $15 an hour, leaving the federal minimum wage at $7.25 per hour, unchanged since July 2009. However, ongoing efforts to increase the federal minimum wage through legislation are underway. For instance, Senators Josh Hawley and Peter Welch have introduced a bill to raise the federal minimum wage to $15 per hour, although it has not yet been passed.

Senator Bernie Sanders has reintroduced the Raise the Wage Act, aiming to gradually increase the federal minimum wage to $17 an hour over five years. However, this proposal also remains pending. Some states have independently implemented a $15 minimum wage, with eleven states reaching this mark by July 2025.

President Biden and many Democrats have made a minimum wage increase a stated priority. The $1.9 trillion relief package passed and signed by President Joe Biden earlier this month did not contain a provision to raise the federal minimum wage.

In the apparel retail sector, a $15 minimum wage would impact about 15% of a company's operating profit. At off-pricer Ross Stores, a $15 minimum wage would only lead to a 6.1% hit to operating profit. Analysts with Morgan Stanley found that a federal minimum wage of $11 could reduce operating profits by 3%-10% for department stores, restaurants, and food retailers.

One way to recoup costs from a minimum wage increase is by raising prices. Researchers have linked higher minimum wages to reductions in suicides, with a $1 increase in wage corresponding to a 3.4%-5.9% decrease in the suicide rate.

As the debate continues, it's clear that the minimum wage discussion is far from over, with both supporters and opponents presenting compelling arguments on the potential impacts on workers, businesses, and the economy as a whole.

1. The government's role in setting the minimum wage is a contentious issue, with debates centered around its impact on workers, businesses, and the economy.
2. A study by University of California, Berkeley professors indicated that increasing the minimum wage could help reduce racial earnings disparities.
3. In response, it's essential to consider the potential price increases that could result from a higher minimum wage, as suggested by Dale Belman, a professor at Michigan State University.
4. As of now, 27 cities and counties have enacted a minimum wage of $15, affecting approximately 30% of retail workers directly and an additional 8.5% indirectly.
5. Retail giants like Costco have managed to cope with higher wages by increasing efficiency, while smaller businesses might struggle more.
6. The National Retail Federation and the Retail Industry Leaders Association have kept quiet on the $15 minimum wage proposal during the Senate's stimulus discussions, but many of their members might support the increase.
7. The Senate parliamentarian has blocked a minimum wage hike to $15 an hour, leaving the federal minimum wage at $7.25 per hour.
8. Senator Bernie Sanders has reintroduced the Raise the Wage Act, aiming to increase the federal minimum wage to $17 an hour over five years, but the proposal is still pending.
9. Some states have already set a $15 minimum wage, such as Massachusetts and California, with various other states planning to do so by 2025.
10. President Biden and many Democrats have prioritized a minimum wage increase, but the $1.9 trillion relief package passed this month did not include such a provision.
11. In the apparel retail sector, a $15 minimum wage could impact about 15% of a company's operating profit, with off-pricer Ross Stores being less affected.
12. Analysts have suggested that raising prices could help companies recoup costs from a minimum wage increase. There is also research linking higher minimum wages to a potential decrease in suicide rates.
13. The ongoing minimum wage debate involves discerning the potential benefits and drawbacks for workers, businesses, and the economy as a whole, with both supporters and opponents presenting persuasive arguments.

Read also: