Tracking the Pros and Cons of Increasing the Minimum Wage

IS A HIGHER MINIMUM WAGE PROFITABLE OR SUSTAINABLE?
But business chiefs need to make careful consideration of any change in their minimum wages for a number of reasons. Higher minimums in the low-margin restaurant business mainly work for brands that operate at the fast-casual level, at higher price points, or in major metro markets where incomes tend to be highest, such as New York, Boston, Seattle and Washington, D.C.

Besides, there are major flaws in the case that political progressives make for the economic lift provided by higher wages. Many companies have made it clear that they would lay off workers if forced to boost minimum wages significantly.

“The share of benefits going to poor families from a $10.10 minimum wage would amount to only 18% of overall benefits, with 29% going to families with incomes three times the poverty level or higher.”

Also, recent research has shown that while low-wage workers may benefit from a higher minimum, low-wage families—said to be the most important beneficiaries of a so-called “living wage” for low-income Americans—don’t benefit nearly as much.

The share of benefits going to poor families from a $10.10 minimum wage would amount to only 18% of overall benefits, with 29% going to families with incomes three times the poverty level or higher, according to new research from the University of California, Irvine.

That’s because most minimum-wage workers nowadays are not the primary breadwinners and often contribute a small share of the family’s overall income, such as spouses who run the household or young adults who live with their parents.

When it comes to raising workers’ pay, businesses must look at the competitive advantage, or lack thereof, on a case-by-case basis. The bottom line: Raising the minimum wage will not solve all of America’s poverty issues.