Although the American economy is slowly recovering, the job market is not. Low and minimum wage work has driven much of the recovery while mid-level jobs that disappeared during the recession have failed to rematerialize. Confronted with this bleak “new normal,” many people in both the private and public sectors have called for an increase to the federal minimum wage. Advocates for change point to cases like that of Anthony Goytia, who must supplement his salary as a Wal-Mart clerk with catering jobs and medical testing.
Stories like this one are becoming all too common for typical Americans who must work almost nonstop in order to support their families. As income for the top bracket of earners rose 275 percent from 1979 to 2007, those at the bottom of the spectrum saw salaries rise by just 18 percent. In fact, the federal minimum wage of $7.25 has lost 5.8 percent of its market value since being raised in 2009. With these figures looming over much of the American public, President Obama recently called for Congress to increase the benchmark salary to $10.10. Advocates claim this wage will increase people’s purchasing power and make them more loyal to employers, thus reducing costly turnover.
However, opponents of raising the minimum wage argue the measure would actually kill jobs rather than create them. After all, many companies are already operating on thin margins in order to stay afloat. A mandated salary increase could prevent some businesses from continuing to hire. McDonald’s, for instance, has faced rounds of protests demanding that the chain raise wages to $15 an hour. The company responded to the criticism by saying such an increase would lead to “personnel decisions” (i.e. firings and cut hours) at 86 percent of locations. While McDonald’s attitude is reflective of most of the restaurant industry, Ron Shaich, the CEO of the bakery chain Panera, sees things differently. He backs a minimum wage raise so long as it applies to all businesses. That way the increased costs will be relative across the board, eliminating many of the measure’s negative effects.
Questions:
- Would increasing the minimum wage help overcome key economic problems?
- Does increasing the minimum wage make workers more loyal to employers?
Source: “Raising the Floor,” The Economist, December 14, 2013. Photo courtesy of Walmart Corporate.