Labor Management

Square-Off: Is Raising the Minimum Wage a Good Idea?

It may be a good idea, but for whom? Experts weigh in on the impacts a minimum wage increase could have on employment and the economy.
Sean AlloccaFebruary 16, 2017
Square-Off: Is Raising the Minimum Wage a Good Idea?

Raising the minimum wage won big last November. A handful of states passed legislation to significantly hike pay floors across the country, which may represent a building sea change in public opinion away from business interests. From New York City to Seattle, the “Fight for $15” is increasingly becoming a reality. Twenty-nine states and the District of Columbia now have higher minimum wages than the federal mandate of $7.25 an hour.

Advocates of the hikes say the wage floor has lagged far behind cost-of-living expenses for the better part of five decades. The high-water mark was 1968, when it hit $11.10 an hour in today’s dollars. With more expendable income in workers’ pockets, the advocates say, they transform into consumers dumping that additional income back into local economies.

Last year, Costco raised its base pay for entry-level employees for the first time in nine years. The company estimated the move would cost investors two pennies a share over the next three years. “It’s like chicken soup,” CFO Richard Galanti said during an earnings call in March. “It can’t hurt.”

But other executives say higher wages could cause serious headwinds for their companies — especially in industries like retail, hospitality, and food service that employ many low-skilled, low-wage workers. A Duke/CFO Business Outlook survey from July 2016 found that 32% of respondents were worried about potential wage hikes, making it a top-five concern.

Opponents fear higher labor costs will be passed on to consumers or will force companies to cut jobs to absorb the additional expense. Employers likely would cut the lowest-skilled jobs altogether or invest capital toward automating those positions, thereby hurting the very workers the hikes were meant to protect.

In the short term, experts on both sides believe job cuts could be a real possibility. But what effects will minimum wage increases have on employment and the economy down the line? Should private enterprise be responsible for boosting low incomes? Should government programs help shoulder the burden?

Here, four experts weigh in on the reasons for wage hikes and what they could mean for employers, workers, and the economy at large.