As a teenager opens their first paycheck from their after-school job, they feel a wave of excitement as they see all the money that their waiting tables, flipping burgers, or stocking shelves has earned them. If you ask that same teenager if they would like to earn $15 an hour instead of the smaller wage that they had been earning, they would of course say that they would. When thinking just of yourself, the minimum wage worker, receiving such a large increase in your hourly rate would greatly help you in the long run. Allowing you to save more money for college or spend more money without feeling guilty is an opportunity that few teenagers would pass up. While the teenager would be smiling all the way to the bank, the business owner would be left stressing over their finances as they update their books.
One of the biggest reasons people cite for wanting an increase in the mandated minimum wage is so that the people that earn these low wages would be able to better support their families. But the truth is, minimum wage jobs have never been designed to be someone’s main source of income, especially if that person has children or other people that are dependent on them. These low paying jobs are designed for teenagers that are trying to save extra money for college, not for single parents attempting to support themselves and their children. According to the Economic Policy Institute, a non-profit company based in Washington, D.C., the average cost of living in the United States for a family that consists of two parents and two children is $48,778. The average full-time minimum wage worker will bring home $15,080 before taxes, given that they work 40 hours every week of the year without taking any vacation or sick time. Even in a hypothetical scenario where both minimum-wage earning parents do not get any money taken out of their paychecks for taxes, insurance, or otherwise, the four-person family will still fall a whopping $18,618 short of the average cost of living. However, the average recent college graduate with just a bachelor’s degree could single handedly cover the average cost of living for that same family of four with money to spare. Increasing the minimum wage may be an obvious solution to lessening that $18,618 gap and would help make the wage earned in a job meant for a teenager more livable for the working parents that it was not designed for. With increased wages comes the issue of nationwide inflation that will affect all consumers, including those that hold degrees and are able to support themselves.
Inflation is defined as the rate at which the general level of prices for goods and services is rising and, as a result, the purchasing power of currency is falling. It is because of inflation that a fifteen-dollar minimum wage would affect every consumer, from those that are struggling to survive on the minimum wage to those that make six-figures each year. As an example, let’s use a jar of peanut butter to represent the behavior of all goods as the minimum wage increases. Currently, in 2018, this jar of peanut butter costs $4 and the people that work in the factory workers that produce it make the average minimum wage hourly rate, which currently stands at $7.25 in the United States. However, if the owners of the peanut butter factory are now legally required to pay their workers $15 per hour, more than double what they were making before, for doing the same amount of work, they must consequently increase the price of their product to help cover this wage increase. Now, everyone must pay six or eight dollars or more for that same jar of peanut butter, including the adults that hold degrees and earn a livable wage for themselves and even those minimum wage workers that just got a pay raise. If increasing the minimum wage will inflate the prices of things that people buy everyday, those that live off of minimum wage will still have to pay, proportionately, the same amount of their salary for these everyday items while the Americans that have completed higher education will also have to pay these inflated prices without the added cushion of a higher salary. While the larger businesses, such as the hypothetical peanut butter factory, will be better equipped to adjust to these increased wages, smaller scale retailers will not be as fortunate and will quickly fall victim to their decreasing profit margin.
The quaint and charming “mom-and-pop” stores would be the first tier of businesses to crumble with the large increase in minimum wage, with others quickly following behind them. In order to account for now being required to pay their hourly employees such a high rate, they will also have to increase their prices, much like in the previous example of the peanut butter factory. The only difference is that the mom-and-pop shop will not have the luxury of being as lenient with their price increases as a larger store would have, and it is unlikely that a person will spend more money to get a pair of pants at a general store as opposed to a Walmart.
Those that are behind the so-called “Fight for Fifteen” movement are only thinking of the short-term, not about how this wage increase will affect businesses of various scales and how it will also affect people from all incomes as they attempt to buy items that have greatly increased in price. While low-wage workers will experience a brief moment of relief as their income overshadows their expenses, once the inevitable period of inflation catches up with the American population, these workers will soon be demanding even more money and unknowingly getting themselves and their higher-earning counterparts into a never-ending cycle that undoubtedly does more harm than good.