The principle of a minimum wage comes with an inherent debate: Some argue that it contributes to an increased unemployment rate; others say that the minimum wage is crucial in keeping poverty levels low. It’s a debate that’s been going on since the establishment of a federal minimum wage in the 1930s, but it has become even more relevant during these difficult economic times.
Many economists now argue that eliminating the minimum wage would allow cash-strapped companies to create more jobs. While this side of the argument does raise logical points, an article by The New York Times highlighted a recent study that makes a strong case for the opposite.
The study, called “Minimum Wage Effects Across State Borders: Estimates Using Contiguous Counties” not only found that the minimum wage has virtually no effect on employment levels of low-wage jobs, but that it also successfully increases the standard of living for workers in low-paying industries like food service and retail.
The research was conducted by economists at the University of Massachusetts at Amherst, the University of North Carolina at Chapel Hill and the University of California at Berkeley, who analyzed 16 years of employment data for low-wage workers. Full results of the study can be read here, or watched in a simplified, video version here.
Though the study presents interesting information, it’s especially compelling given the recent midterm elections, which could have an impact on both the minimum wage and employment. Here are a few things to keep in mind about the minimum wage:
- Historically, the Democratic Party has proposed increases to the minimum wage, while the Republican Party has been in favor of capping or eliminating the minimum wage.
- According to the 2000 Census, there are more than 10 million minimum-wage workers in the U.S.
- In 2006, nearly half of surveyed economists said the minimum wage should be abolished. Only one-third said it should be increased.
- Washington state has the highest minimum wage, at $8.55, followed by Oregon, at $8.40.
- In January 2011, the minimum wage in San Francisco will be raised to $9.92. San Francisco also has one of the nation’s highest costs of living.
- Five states in the U.S. have no minimum-wage requirement: Alabama, Louisiana, Mississippi, South Carolina and Tennessee.
- Working a job at the current federal minimum wage, $7.25, for 40 hours per week, all 52 weeks of the year produces an annual, pre-tax income of $15,080. If about one-third of that income is paid in taxes and benefits, net annual income becomes $10,556.
- In Oklahoma City, the major U.S. metropolitan area with the lowest average housing costs, one year of rent averages $8,676.
- The poverty line for a family of four is an annual income of $22,050.
What do you think about the minimum wage? Do you think it prevents poverty or increases unemployment? Let us know in the comments section, below.