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Raising the minimum wage?

By Luke Kim
web posted November 19, 2018

The debate over raising the minimum wage has become increasingly popular in the past decade. Advocates for raising the minimum argue how it would be helpful in sustaining impoverished families. On a similar note, Aaron Rothemich argues in a 2016 article, “No debate about needing a living wage,” specifically the low minimum wage. Although Rothemich expresses his passion for raising the low minimum wage, he fails to capture the true nature of this issue.

Rothemich’s article makes a hasty assumption about the correlation between the minimum wage and business prices. He states how, “although conservatives claim that raising wages would result in a rise in prices, independent studies, such as one by researchers at Purdue University, have found that raising the minimum wage to $15 an hour would result in only modest price increases”. Even though Rothemich supports his argument with a Purdue University study, he does not seem to acknowledge the basic relationship between labor supply and demand. Setting a minimum wage, often referred to as a price floor, creates a divide between the supply and demand of jobs.

When businesses are required to pay workers a certain amount above the equilibrium wage, they hire less workers. As a result, this reduces the amount of workers in the labor force, thus creating more unemployment. If the national minimum wage was raised, businesses would have to compensate for these higher wages by raising their prices. This hike in prices forces consumers, especially those of the lower and middle class, to spend more on goods. Additionally, because goods produced by minimum wage workers are bought by those in lower socioeconomic areas, inflation would especially affect those who are impoverished.

Rothemich’s posed solution, which involves fighting for a higher minimum wage through the formation of a union, would incite more division in this debate than there already is. As Rothemich addresses worker issues in South Carolina, he writes how, “the Southeast needs to learn how to fight back, and fighting for $15 an hour and a union is a great place to start”. Rothemich is proposing a solution that seems antithetical to a peaceful resolution. “Fighting back” connotes aggression, which could lead to greater polarization between supporters and dissenters of this issue.  

A lot has changed since Rothemich published this article in 2016. Donald Trump has changed the U.S. economy so that it has more job opportunities. Joseph Geevarghese writes in his article, “Trump administration is America’s No. 1 low-wage job creator,” how “Trump’s federal government funds more than 4.5 million jobs in the private sector that pay less than a living wage of $15 per hour” (Geevarghese).  Even though Trump has not changed the minimum wage, he has been influential in bridging the gap between the supply of laborers and the limited job opportunities. Rothemich’s argument not only fails to recognize the basic relationship between labor supply and demand, but it also poses a solution which would spark unnecessary division in the minimum wage debate. ESR

Luke Kim is a high school student studying AP Macroeconomics. © 2018 Luke Kim.

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