Category Archives: nonprofits

Minimum Wage Increase: Costs, Benefits and Complexities

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The social and economic implications of raising the minimum wage make it a very complex issue. We know that increased wages enhance educational, housing and nutritional opportunities for families and have a tremendously positive impact on the purchasing power of individuals.

Christine McMahon

Christine McMahon

In general, raising the minimum wage is hard to argue against, yet we need to consider the unintended consequences. Will employers withhold additional dollars for training and education? Will a higher minimum wage raise the qualifications for entry-level jobs? Will this result in a reduction in hiring? We have to ask the right questions and ensure that employers and employees work together to enhance the workplace experience.

In the U.S. general elections held on November 4th voters in four states – Alaska, Arkansas, Nebraska and South Dakota – approved measures to increase the minimum wage. The measures, which will all be fully implemented by January 2017, will affect approximately 420,000 low-wage earners.

In Illinois, voters passed a non-binding referendum to increase the minimum wage to $10/hour, and voters in San Francisco voted to increase the minimum wage to $15/hour, following in the footsteps of Seattle, which last year became the first major city to implement at $15/hour minimum wage. Meanwhile, in October, the Los Angeles City Council approved an ordinance that sets a minimum hourly wage of $15.37 for workers at Los Angeles hotels with at least 125 guest rooms.

These increases have been implemented by voters in bipartisan fashion, across party lines, and appear to signify a new economic reality. While increases in the minimum wage have historically had a small impact on the nation’s economy as a whole, it will be interesting to see the impact of wage increases at city and state levels in the years ahead.

One area that causes me concern is the impact of a higher minimum wage on disadvantaged youth and unskilled workers. Fedcap’s mission is to help people with barriers become economically self-sufficient through training and employment, and to create pathways to economic self-sufficiency. Will a higher minimum wage create yet another barrier for these individuals to enter the workforce and gain the experience and skills they need to advance? That is the complexity that we face as we consider this issue.

Certainly, while it is clear that an increased wage is a first step in rising out of poverty, in and of itself, it is not sufficient. A higher minimum wage will not enable people to own their own home, purchase health insurance or afford a quality education for their children. Education and training have always been and will continue to be the means by which people escape the poverty trap. Whatever the minimum wage may be, we always have to think about the best ways to help people advance in the workplace and build a pathway to economic well-being.

Our 8th Solutions Series was convened to explore these complex questions. I thank you for your participation, and look forward to continuing the conversation.

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