The Impact of Raising Minimum Wage on the Cost of Living and Business Operations

The debate over raising the minimum wage is a complex issue, encompassing economic, social, and business considerations. While some argue that it can lead to higher prices and a rise in the cost of living, others believe it can lead to improved living standards and economic growth. This article explores both sides of the argument, focusing on the impact on businesses and consumers.

Arguments Against Raising Minimum Wage

One of the primary concerns is that raising the minimum wage could significantly increase the cost of doing business. This higher cost would likely be passed on to consumers in the form of higher prices. According to many economists, a high minimum wage is a lose-lose situation, where no one truly benefits except for those collecting taxes. When minimum wage is increased, smaller businesses may not be able to sustain the higher labor costs, leading to potential closures and job losses.

Arguments in Favor of Raising Minimum Wage

While it is difficult to generalize, some experts argue that a moderate increase in the minimum wage could help low-income workers maintain a decent standard of living without significantly impacting overall economic health. This is because the increase in wages could help reduce poverty and inequality. However, it is also argued that a substantial increase like to $15 per hour could lead to a negative impact, such as reduced job availability and higher prices for goods and services.

The Reality of Inflation and Worker Compensation

Inflation and worker compensation are closely related. The average rate of inflation in the U.S. is roughly 3% per year. Therefore, raising the minimum wage to $15 per hour could actually result in a decrease in the real purchasing power of workers, given the annual rise in prices. As of 2023, approximately 600,000 workers earn the federal minimum wage, ranging from 115 to 160 million in total workforce. These workers typically have limited bargaining power, making it hard for them to demand higher wages.

The Broader Economic Context

The problem with the cost of living is complex and multifaceted. It is not simply about the dollar amount employees are paid but also about corporate practices and societal values. Many businesses prioritize profit over people, leading to a race to the bottom in terms of wages and benefits. To meaningfully address rising living costs, there must be a shift in corporate culture and values towards valuing people as assets rather than disposable.

Conclusion

While increasing the minimum wage could potentially lead to higher costs of living, the ultimate solution lies in addressing the root causes of economic inequality and corporate greed. Businesses must start treating their employees as valued assets, providing livable wages, better healthcare, and retirement benefits. Only then can we hope to create a more equitable and sustainable economic environment.