The federal minimum wage has increased to $7.25, up from $6.55, bringing back the old debate over whether an increase in minimum wage is bad for business and good for workers. Whichever side of the debate you are on, there will be approximately 5 million workers affected by the increase, according to the US Department of Labor.
The debate continues around whether increasing minimum wage will force businesses to eliminate jobs. Especially in the current economy, businesses complain that forcing an increase in wage expenses can lead to layoffs, driving unemployment even higher. Others claim that in an increase in the minimum wage provides more money to workers, which in turn can help with stimulating the economy.
Studies for previous minimum wage increases have been completed with different results from different studies. Some economists claim that increasing the minimum wage does help the economy. Previous statistics point to this minimum wage increase adding about 5.5 billion into the economy over the next 12 months since low-wage earners typically do not save the increase, instead they spend it, putting that money right back into the economy.
[AD]Other studies that show less positive effects from a minimum wage increase point to the negative effect on small businesses. Many small businesses cannot afford to provide wage increases. The current economy has led to many businesses suffering, just trying to stay afloat until the economy begins to improve. With small businesses struggeling, will that mean more job losses? An increase in the unemployment rate?
Then there are studies that show ... nothing. These studies indicate that past minimum wage increase show have no good or bad effects on the economy.
Where do you stand? Share your thoughts below. Are you a minimum-wage earner? If so, how will the increase affect you? If you are a small business owner, will you have to layoff any employees or reduce work hours?