The Future of Minimum Wage

With May fast approaching as well as impending graduation for many college students, one of the main things on everyone’s mind is what the future may hold.  One worry that is generally tagged on to these thoughts is concerns about money. In addition to procuring a job following college, graduates will also be receiving wages. At the moment the state of wages in the US, specifically the minimum wage, is in a bit of a transition.  A change in the minimum wage would lead to factors that could affect the job market for recent graduates.

Before getting into the debate of what would or would not happen should the minimum wage change let’s examine some background information. Currently the federal minimum wage is set at $7.25 per hour.  This wage was set in 2009 which marked an 11% minimum wage increase from the previous year.  Not all states adhere to the $7.25 minimum wage; several states such as California, Connecticut, New Jersey, and New York have already raised their minimum wage.

Currently, the proposal being presented features an incremental increase to the minimum wage over the course of several years. More specifically it is being proposed to increase to $10.10 by 2016.  This plan would apply nationwide and would affect millions of Americans. A common misconception is that minimum wage workers are only teenagers.  This is false; in fact, the average age of workers who will be affected by this increase is 35.  Of the Americans that would be affected 87.5% would be over the age of 20. This age group includes recent college graduates as people who will be affected by the increase.

It is important to note that while a large number of Americans will be directly affected by the change, many will feel the so-called “ripple effect”.   Experts predict that an increase to minimum wage will eventually lead to wage increases across the pay scale.

An additional more grim prediction is that an increase to the minimum wage will actually result in a cut of thousands of jobs.  The thought is that with the need to increase workers’ pay, companies will not be able to afford as many workers.

While neither the ripple effect nor job cuts are certain effects of the minimum wage increase, they are possible consequences that will have to be considered as decisions are being made.

To explore more research and ideas on the future of minimum wage check out this article from US News and this report from the Economic Policy Institute.