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Should the United States Raise the Minimum Wage?

Abstract

Several dozen workers gathered for a protest at a McDonald's in New York City as more than 200 fast-food workers went on strike in November 2012, sparking one of the biggest waves of job actions in the history of the US fast-food industry. The workers had been organized through a campaign called Fight for $15, with the goal of raising the per-hour minimum wage. At the time, the federal minimum wage in the United States was $7.25 per hour.

Almost a decade later, in 2020, that wage remained the same, translating to about $15,000 per year for a full-time worker. Labor organizers continued to raise awareness and fight for a $15 minimum wage. During the 2020 presidential campaign, former Vice President Joseph R. Biden declared his support for raising the federal minimum wage to $15. He had supported increasing the minimum wage before running for president, joining New York's Governor Andrew M. Cuomo in successfully advocating an increase in New York State's minimum wage to $15 in 2015. New York wasn't alone in raising the minimum wage; in recent years, 29 states and the District of Columbia had adopted a minimum wage higher than the federal minimum, with eight states instituting a $15 minimum wage. Forty-five localities, including cities such as Chicago, New York, San Francisco, and Denver, had set minimum wages higher than their state's minimum.

The COVID-19 pandemic reinvigorated the national conversation around increasing the minimum wage. When states went into lockdown, families around the country relied on low-wage workers for food delivery, keeping grocery stores' shelves stocked, and care for the elderly in nursing homes. Meanwhile, unemployment soared to more than 11% in June 2020, provoking discussion around whether raising the minimum wage could help stimulate a battered economy.

Although raising the minimum wage had President Biden's support, a variety of policy challenges stood in the way. Opponents to raising the minimum wage maintained that the benefits reaped by some workers would be far outpaced by the costs to businesses, which would then become more reluctant to hire. Some argued that higher labor costs could threaten small businesses' ability to stay in business--and small businesses already were struggling due to the COVID-19 pandemic. Others argued that raising the minimum wage would have other adverse effects on the economy, such as higher prices for goods and services.

Determining the future of the minimum wage required understanding the various impacts of implementing a wage floor.

Type

Case

Author(s)

David Besanko, Anna Koelsch

Date Published

12/15/2021

Discipline

Strategy;Business and Government Relations

Citations

Besanko, David, and Anna Koelsch. Should the United States Raise the Minimum Wage?. Case 5-321-507.

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