The Case for a Higher Minumum Wage

A lesson in basic macroeconomics, and why we can’t trust corporations to play nice on their own

Ahad Sheriff

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Nothing in the economy is as simple as one thing making another happen. Inflation is simply the value of the dollar becoming less, which raising minimum wage does affect. Inflation is caused by adding to the supply of money. Raising minimum wage helps circulate the money that typically pools at the top of the chain, thus increasing consumer spending, boosting the economy.

Low-income individuals tend to spend a higher percentage of their wealth (Engel’s Law), meaning that if their wages increase, they will have more to spend. This relationship leads to money circulating in the market rather than pooling in a savings account or under a mattress. With this basic concept in mind, we can safely assume that an increase in economic activity makes up for the inflation of currency in the long run. Studies even show that a higher minimum wage has no overall impact on restaurant and grocery costs.

While the minimum wage cannot rise indefinitely, it must increase at the same rate of inflation, which it hasn’t. The result? Economic stagnation and an increase in wealth and income inequality.

Another criticism of increasing the minimum wage is implying that individuals must not be working hard enough to deserve an increase, that minimum wage jobs are for individuals looking to start a career, not replace a career. The idea is problematic because nobody truly WANTS to be making minimum wage, especially not individuals who have families to support. Effort does not determine pay; instead, individuals are compensated for the duties that their job entails — which is defined by their employers.

But why raise the minimum wage when companies can decide to pay their employees more? If an individual wants more money, why can’t they get another job that pays more? Why must the government get involved? Surely a fast-food worker doesn’t deserve to be making more money than they already do. The problem is that companies don’t choose to pay more, understandably so. Paying lower wages to employees means higher margins, which means more profits for business owners, which is why a minimum threshold must exist. Corporations don’t set fair wages on their own, which is why laws must force companies to behave ethically in a free market.

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