Recent proposals to change the minimum wage laws at the federal level have resuscitated discussion about what minimum wage is acceptable. The Raise the Wage Act bill would amend the Fair Labor Standards Act originally created in 1938 to increase the minimum wage. This is a change that will deeply affect both employees and employers for the worse.

The bill was originally brought to the table by New York minimum wage workers who argued that they were not receiving enough income to live in their state. It was approved by the House, but stalled in the Senate and did not become law. Instead, individual states have set their own minimum wage increase. For example, the minimum wage will increase by one dollar every year until it hits $15 an hour in New York. Voters in Arizona approved Proposition 206, which increased the minimum wage in Arizona to $12 in 2020.

Although it may seem like this change will only affect minimum wage employees, it will affect the workforce as a whole. Employers simply cannot afford to pay their employees that drastic of a pay increase. Employees will either lose benefits such as healthcare or lose hours that will ultimately make them less profit in the end. This hurts both the employee and the employer.

For instance, in Settle, economists from the University of Washington found that, although low-paying jobs increased 3.1 percent last year, hours worked plummeted 9.4 percent. This comes out to be 3.5 million hours per quarter lost and $125 a month less in paychecks for low-paid workers.

Higher wage reduces the amount of labor demanded, so higher minimum wage ultimately leads to unemployment. Employers could also be unable to provide adequate benefits to their employees. Most small scale business employers do not have enough income to pay their employees and continue to grow as an organization.

In a recent study conducted by Kris Dunn, president of several Venture capital businesses, 72 percent of U.S.-based economists oppose a federal minimum wage of $15 an hour. So, why the House still passed this bill is a mystery.

On the other hand, according to Congressional economists, the bill is expected to boost pay for 27 million U.S. workers, lifting 1.3 million households out of poverty. However, in the long run, employees actually lose more money annually because of the loss of hours.

Because employees will receive fewer hours, work stress will be increased due to the lack of employees. Understaffing can be a serious issue and incredibly stressful. 

Going forward, small scale businesses will begin to deteriorate as the minimum wage increases each year, affecting local communities nationwide. Meanwhile, large corporate operations, such as Amazon, will continue to thrive and will have no problem increasing their workers’ paychecks. 

Raising the minimum wage is not the solution to help pull workers out of poverty.