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Rise of minimum wage raises conflict in decision making

According to USA Today, 14 states have already raised minimum wage above the federal minimum wage as of Jan. 1, 2014. The highest minimum wage is currently in Washington – $9.32.

The talk of raising minimum wage has been a dispute for Congress throughout the past few months and years. Right now, economists remain sharply divided by this issue.

Minimum wage has not been raised since the summer of 2009. According to Daily Kos Labor, a minimum wage of $7.25 offers a full-time annual income of $15,080.

A CNN article stated that that if minimum wage had kept up pace with the cost of living since 1968, it would be $10.56 now.

The higher income from an increase in minimum wage, however, could allow people relying on paycheck to paycheck to have extra money that they will most likely spend on goods.

“This increase in consumption of minimum wage workers will lead to an increase in demand for the output (production) of firms,” said Dipak Ghosh, professor of economics. “Therefore, if firms can actually sell more goods and services, they will have an incentive to hire more workers, and the increase in minimum wage may actually increase the demand for workers.”

Kevin Johnson, associate professor of business and ESU general counsel said that if minimum wage rose to $10 per hour, employers would “undoubtedly” have to raise their prices to cover it.

“Fast food and retail employers typically operate on very small profit margins and require a great amount of business to be profitable,” Johnson said.

One of the worries of raising minimum wage is the risk of more unemployment.

“The increase in the minimum wage would increase the labor costs of employers, and therefore reduce the demand for workers, increasing unemployment,” Ghosh said.

But, raising the federal wage would also affect union contracts because their hourly wages are based on what minimum wage is so therefore “an increase in one means an increase in another,” Johnson said.

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