Toe the Line: Penn Democrats | Increasing the minimum

The minimum wage debate

By Sean Foley 04/01/15 11:13pm

In Economics 001 with Rebecca Stein, Penn students learn that a government-imposed minimum wage distorts the market equilibrium and creates unemployment. However, as Professor Stein would likely admit, her lesson on the minimum wage falls short of reality. In practice, a reasonable minimum wage benefits low-income employees more than it harms the labor market. While President Obama’s proposal to increase the federal minimum wage from $7.25 to $10.10 languishes in the Republican-controlled Congress, Penn Democrats applauds Governor Tom Wolf’s effort to increase Pennsylvania’s minimum wage. We encourage Congress to make a living wage possible for every American.

While productivity and per capita Gross Domestic Product have risen significantly since 1950, the real value of the minimum wage has fallen over time. Currently, full-time workers earning $7.25 an hour make only $15,000 annually. Penn’s room and board fees are nearly that much. It is incredibly difficult to live on that salary, let alone raise a family with it.

Additionally, the economics support increasing the minimum wage. According to the nonpartisan Congressional Budget Office (CBO), raising the federal minimum wage to $10.10 an hour would, at worst, cause a reduction in employment for 1 million workers, but the increase would benefit about 16.5 million employees. Accounting for these increased earnings and slight employment reduction, there would still be a $2 billion increase in net real income. There is also wide support among scholars for a higher minimum wage. In 2014, 600 economists — including seven Nobel laureates — sent President Obama and congressional leaders a letter urging them to increase the minimum wage to $10.10 by 2016.

Although most opponents of a minimum wage increase argue it would hurt the people it intends to help, studies prove the contrary. According to the aforementioned CBO study, low-income and middle-class families would accrue significant benefits from a minimum wage increase. Gary Burtless, an economist at the Brookings Institution and cosignatory of the letter to President Obama, found the increased weekly earnings gained by low-wage earners who remain employed would significantly exceed the earnings lost by the reduction in employment.

The choice is clear: Increase the minimum wage and empower low-income workers while boosting the economy, or accept the status quo and continue to see millions of hard-working Americans struggle to survive despite working full-time jobs. Let’s raise the wage.

Sean Foley

C‘16

Penn Democrats representative

Toe the Line examines issues from two different sides. Click here to see the Penn College Republicans side.

Please note All comments are eligible for publication in The Daily Pennsylvanian.