The federal minimum wage was introduced in 1938 during the Great Depression under President Franklin Delano Roosevelt. It was initially set at $0.25 per hour and has been increased by Congress 22 times, most recently in 2009 when it went from $6.55 to $7.25 an hour. 29 states plus the District of Columbia (DC) have a minimum wage higher than the federal minimum wage. 1.8 million workers (or 2.3% of the hourly paid working population) earn the federal minimum wage or below.

Proponents of a higher minimum wage state that the current federal minimum wage of $7.25 per hour is too low for anyone to live on; that a higher minimum wage will help create jobs and grow the economy; that the declining value of the minimum wage is one of the primary causes of wage inequality between low- and middle-income workers; and that a majority of Americans, including a slim majority of self-described conservatives, support increasing the minimum wage.

Opponents say that many businesses cannot afford to pay their workers more, and will be forced to close, lay off workers, or reduce hiring; that increases have been shown to make it more difficult for low-skilled workers with little or no work experience to find jobs or become upwardly mobile; and that raising the minimum wage at the federal level does not take into account regional cost-of-living variations where raising the minimum wage could hurt low-income communities in particular.

Give a brief summary of each of the 2 benefits and each of the 2 costs of the minimum wage and explain why they are the most important. Give some details.

Cost and Benefit Arguments (2 benefits, 2 costs) :

Benefit 1

Increasing the minimum wage could reduce poverty.

A person working full time at the federal minimum wage of $7.25 per hour earns $15,080 in a year, which is 20% higher than the 2015 federal poverty level of $12,331 for a one-person household under 65 years of age but 8% below the 2015 federal poverty level of $16,337 for a single-parent family with a child under 18 years of age. According to a 2014 Congressional Budget Office report, increasing the minimum wage to $9 would lift 300,000 people out of poverty, and an increase to $10.10 would lift 900,000 people out of poverty. [5] A 2013 study by University of Massachusetts at Amherst economist Arindrajit Dube, PhD, estimated that increasing the

minimum wage to $10.10 is "projected to reduce the number of non-elderly living in poverty by around 4.6 million, or by 6.8 million when longer term effects are accounted for." [6]

Benefit 2

A higher minimum wage could reduce government welfare spending.

If low-income workers earned more money, their dependence on, and eligibility for, government benefits would decrease. The Center for American Progress reported in 2014 that raising the federal minimum wage by 6% to $10.10 would reduce spending on the Supplemental Nutrition Assistance Program (SNAP, formerly known as food stamps) by 6% or $4.6 billion. [9] The Economic Policy Institute determined that by increasing the minimum wage to $10.10, more than 1.7 million. Americans would no longer be dependent on government assistance programs. They report the increase would shave $7.6 billion off annual government spending on income-support programs.

Cost 1

Increasing the minimum wage could force businesses to lay off employees and raise unemployment levels.

The Congressional Budget Office projected that a minimum wage increase from $7.25 to $10.10 would result in a loss of 500,000 jobs. [5] In a survey of 1,213 businesses and human resources professionals, 38% of employers who currently pay minimum wage said they would lay off some employees if the minimum wage was raised to $10.10. 54% said they would decrease hiring

levels. [44] San Francisco's Office of Economic Analysis said that an increase to $15 would reduce the city's employment by about "15,270 private sector jobs." [45] In 2014, Steve H. Hanke, PhD, Professor of Applied Economics at Johns Hopkins University, surveyed the 21 European Union (EU) countries that have a minimum wage and found they had an average unemployment rate of 11.8%, about a third higher than the 7.9% average unemployment rate in the seven EU countries that have no minimum wage.

Cost 2

Raising the minimum wage would increase the price of consumer goods.

A 2013 article by the Federal Reserve Bank of Chicago stated that if the minimum wage is increased, fast-food restaurants would pass on almost 100% of their increased labor costs on to consumers and that other firms may do the same. 2 A 2015 Purdue University study found that raising the wage of fast food restaurant employees to $15 or $22 per hour would result in a price increase of 4.3% and 25% respectively, or a reduction in product size between 12% and 70%: "a hamburger would be much smaller," the researchers stated. [53] NBC News found that the price of a cup of coffee went up by 10 to 20% in Oakland, California, after a 36% minimum wage hike in the city to $12.25. The report also found a 6.7% rise in coffee prices in Chicago after the minimum wage rose to $10. [54] The Alberta Hotel and Lodging Association (Canada) found that a "sudden and significant increase to the minimum wage" would result in "[increased prices for food & beverage, guest rooms and meeting facilities."