Raising the Minimum Wage: More Money, More Problems?

By Kristine Kessler | October 23, 2013

Minimum wage has come a long way in the United States since the Fair Labor Standards Act of 1938, which established the first federal minimum wage at $0.25. Since then, the federal minimum wage for all covered, non-exempt employees has steadily increased in nominal value to today’s minimum wage of $7.25. Even though the federal minimum wage has been rising, various states and municipalities throughout the country have required a higher minimum wage for their citizens.

As of August 29, 2013, 34 states and Puerto Rico had introduced legislation this year regarding minimum wage issues. Some of these bills included provisions that would not allow local government entities to enact a competing minimum wage rate in their jurisdiction. The states’ fear of minimum wage being dictated by local governments is not unfounded; at this moment there are two counties in Maryland seeking to increase the minimum wage to about $11.50 an hour.

At the local level, policymakers generally recognize the need to tread lightly when determining how much to raise the minimum wage. Areas want to remain attractive to businesses and most government representatives understand that employers do pay attention to how much they will have to pay their employees. For businesses already in the area, minimum wage legislation generally attempts to make the change more tolerable by implementing the wage increase in phases.

However, upon determining how much a minimum wage increase would affect profits, companies seeking to establish themselves in the area may rethink their plans. This was the case in DC when the district tried to impose a minimum wage of $12.50 an hour for “big-box” retailers. The uproar over the proposal jeopardized Walmart’s plans to open new stores in DC, which would have resulted in fewer job openings and shopping options for local residents. The proposed increase was ultimately rejected by DC Mayor Gray.

Situations like the one in DC cause legislators to carefully consider whether increased minimum wages truly provide the best for their constituents. Areas that act alone on this issue ostracize companies that would otherwise boost their economy. The implications of raising the minimum wage across localities have effects that cannot be ignored.

Recent Articles

Popular Articles