Raising wages won’t solve income inequality

Justin Diep, Copy Editor

Under the $1.9 trillion COVID relief plan known as the American Rescue Plan, President Joe Biden calls for a $15 federal minimum wage so “workers across the country can live a middle-class life and provide opportunity for their families.” Some Democrats in Congress have even asked for a $20 minimum wage. Raising the minimum wage would be terrible for all Americans. Addressing the income inequality and poverty in our country is important, but this, more than doubling the minimum wage, would only worsen the problems it is trying to solve. 

Instead of raising wages for workers, thousands, potentially millions of workers would be jobless according to a study done by the Congressional Budget Office (CBO). Under a plan to raise the minimum wage to $15 by 2025, the CBO estimated as many as 3.7 million workers would become jobless. Many of these jobs will not be replaced by other workers picking up more hours but by machines and artificial intelligence. 

A raise in the minimum wage would not only affect those making minimum wage but it would affect everyone. If businesses have to more than double the pay for their employees, they will cut employees and raise prices. The Federal Reserve Bank of Chicago found that fast-food restaurants would pass 100% of the cost of an increase of the minimum wage onto consumers by jacking up prices. Other businesses would likely do the same. 

Workers who were able to dodge getting cut would indeed see their wage go up, but the checks they bring home may be the same or even less than before. CNN found when Target raised their minimum wage to $15 many employees reported losing as many as half their hours resulting in a smaller check than before the rise in wages. 

Employers will also become less generous in terms of employee benefits to cut costs. A study done by Texas A&M University found a significant decline in employer healthcare coverage after a raise in the minimum wage. A decline in employer healthcare coverage could affect half the entire country’s population as they are covered by their employer according to the Census Bureau. Other smaller benefits like free parking and free food at work would also likely be cut. 

A $15 minimum wage does not make sense nationwide. Here in Nebraska the minimum wage is $9, which turns out to be about $18000 a year. If the minimum wage is increased to $15 an hour, a teenager working at McDonald’s would earn about $31000 a year which is close to a starting salary for a first-year teacher which is around $35000. A starting employee at McDonald’s should not be making the same as a teacher. 

Some would then say raise the pay for teachers so every teacher would get a raise, but the government would need to increase taxes to get the money needed to increase their pay. This would happen in every industry to employees making anything near $15 an hour but the price of their products will increase. This increase in taxes and prices negates any benefits proponents have said would come from a minimum wage raise. 

The federal government should leave it up to the local governments to determine what minimum wage is best for their area. It just does not make sense to have San Francisco minimum wages in Nebraska where costs of living are vastly different from California, having one of the highest costs of living and Nebraska having one of the lowest costs of living. The difference is even more dramatic in other states in the Midwest and the South where the cost of living is even lower. 

Instead of raising the minimum wage, the government should aid in raising workers off the minimum wage. Higher wages only come with time, experience and or education. It may only take a year or so to rise above the minimum wage as two-thirds of minimum wage workers earned a raise within their first year, according to the Employment Policies Institute. People making minimum wage should want to achieve a higher wage and work their way up or find jobs that earn more. Some of these jobs need formal education. That’s where the government or employers would step in and aid in getting workers those requirements for these higher wage jobs.