The Negative Effects of Raising Minimum Wage in America

by Hank Coleman

Negative Effects of Raising Minimum WageRaising the minimum wage isn’t always the best course of action for the American economy as a whole. The recent push to raise the minimum wage to $15 per hour has many negative effects that few people take into consideration. There are effects of raising minimum wage.

There are many negative effects of raising minimum wage in the United States.

Does the minimum wage need to increase? Maybe it does. Does it need to more than double, jumping to $15 per hour across the country? Probably not – I think that it’s a bad idea. There are negative effects of raising minimum wage too much and too fast.

Here are a few things to consider why jumping from the current national minimum wage of $7.25 to $15 per hour isn’t a good idea.

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Fewer Jobs Are Created With Higher Minimum Wages

One of the negative effects of raising minimum wage is that fewer jobs are created. 

Many employers will choose to hire fewer employees than they would have done. If the federal minimum wage more than doubles to $15 per hour, many employers may be forced to hire one person instead of two for job openings. They will be forced to simply do without the additional help. Now one person will cost as much as two with a $15 minimum wage.

A higher minimum wage will also increase the costs of items that the average American buys. Do you think that the price of your McDonald’s Big Mac will remain the same if the fast food chain has to pay double for its labor costs?

We will start to see the cost of a lot of items in the country rise. It will bring about an across the board rise of inflation as a result too.

Raising the Minimum Wage Doesn’t Reduce Poverty

Studies have shown that raising the minimum wage does not reduce overall poverty in America. Research from the Employment Policies Institute, shows that raising the minimum wage hurts the minimally skilled and the least-experienced citizen searching for jobs the most.

Increasing the minimum wage has not proven to be effective at lowering the overall poverty rate in America. According to economists at the Federal Reserve Board and the University of California-Irvine, research shows that a higher minimum wage reduces employment for those with the least amount of skills and has little to no effect on poverty rates. 

There is little to no relationship between higher minimum wage and reductions in overall poverty levels in America.

Teens Will Struggle to Find Summer Jobs

Parents across the nation look forward to their children taking responsibility and earning spending money at a summer job. It is a rite of passage in American for most families.

But, many teens will find it hard to find as many jobs as before if the minimum wage is raised. These minimum wage jobs are typically the starting points for many teens looking for summer jobs, which are often their first jobs.

The University of New Hampshire Survey Center conducted a survey of leading national economists discussing specifically the proposed $15 minimum wage raise. Economists believe a $15.00 per hour minimum wage will have negative effects on youth employment levels (83%), adult employment levels (52%), and the number of jobs available (76%).

Raising the minimum wage may keep your teen out of a summer job. Parents may find their teens staying at home this summer even more than their boomerang Millennials do now. 

Minimum Wage Jobs Are a Stepping Stone

Minimum wage jobs are not the end. They’re the beginning. Minimum wage jobs are meant to be a stepping-stone on to bigger and better things. 

Using that argument, there is nothing wrong with minimum wage jobs. They’re necessary for workers to learn the fundamentals of having a job and what is expected of an employee.

Raising the Minimum Wage Increases Inflation 

Inflation is tied with salary growth. We have not seen wage growth in America in the past few years since the recession in 2007-2008. Here is a look at the Department of Labor’s minimum wage chart and the United States’ historic minimum wage growth over the years since the minimum wage’s creation with the Fair Labor Standards Act in 1938.

Jumping up from $7 to $15 is too much, too fast. It’s not in keeping with 3% annual inflation. 

If you go back and look at the United States Department of Labor’s historical minimum wage, the minimum wage was $2.90 in 1979. If Congress had increased the minimum wage every year in keeping with a 3% annual inflation level, today’s minimum wage would have only increased to $7.91 in 2015.

Does the minimum wage need to increase from the current $7.25 level? The simple calculation above shows that it should be at least $7.91 this year.

But, does the minimum wage need to jump to $15 an hour across the country? No, not unless you are ready to accept the consequences of higher costs for goods and services.

What do you think? Do the negative effects of raising minimum wage outweigh the benefits? Is $15 per hour the right number? What should it be?

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About Hank Coleman

Hank Coleman is the founder of Money Q&A, an Iraq combat veteran, a Dr. Pepper addict, and a self-proclaimed investing junkie. He has written extensively for many nationally known financial websites and publications. Hank holds a Master’s Degree in Finance and a graduate certificate in personal financial planning. Email him directly at Hank[at]MoneyQandA.com.


Hank Coleman has written 578 articles on Money Q&A. Learn more about Money Q&A on Twitter @MoneyQandA and @HankColeman.


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