Do Higher Minimum Wage Improve the Economy Overall – or Hurt it?

One of the hottest economic topics in recent months has been the idea of a higher national minimum wage. The city of Seattle approved a monumental minimum wage hike to $15 per hour, which takes full effect slowly. Employees who work in minimum wage jobs know the struggle of working hard for little pay. Many of these jobs are hard on a worker’s hands, feet, back and joints. With not enough money to pay the increasing costs of living and higher health care costs, minimum wage workers are frustrated. While a nationwide increase for the minimum wage may sound appealing, there are still some problems with the reality it would create.

The Cost of Living Varies from Place to Place

Fortune1 recently picked apart the argument presented by activists who favor a higher minimum wage in effect across the entire country. As the average hourly minimum wage suggestion was $15, author Anne VanderMey points out that $15 does not buy the same amount of goods or services in one part of the country as it does in another. For example, about $19 in West Virginia would buy as much as $12 would in New York.

With the disparity in the cost of living across the nation, the $15 hourly wage requirement could spell trouble for many businesses in smaller towns where the cost of living is lower. Many workers could live comfortably in these areas with a minimum wage of $15 but at the cost of losing small independent businesses. However, people in New York City would still find it hard to survive on $15 per hour. While over 70 percent of Americans are in favor of a national wage increase, they arguably do not understand the full impact it would have on businesses in areas where the cost of living is lower.

One Recent Example of a Failed Minimum Wage Increase

In a case study outlined by Zero Hedge2, the CEO of Gravity Payments in Seattle raised the minimum salary of company workers to $70,000 per year by taking a cut of $930,000 from his own salary. The idea was warmly welcomed by wage increase proponents and employees of the company who earned less. Within a few months, the company was in trouble financially.

Several clients cut ties with the firm because of their disagreement with the action. With new workers earning the same wages as senior employees, two of the company’s top employees quit. Turnover always costs businesses money. While economic theories were not a big factor in this case, the effects of raising wages and losing clients elicited a strong opposition existing against minimum wage increases. This makes many people wonder if better pay is really the biggest issue.

What Matters the Most to the Many Employees

In the previous example of Gravity Payments, an important point from the research conducted on the company was how employees felt about the change. While the extra pay was welcomed, many workers reported thinking that the increase was unfair for other workers who had easier jobs or performed poorly. Giving equal raises to people when they have not earned them can be bad for workplace morale and can lower productivity as a result.

CW33 News shared a study from Randstad U.S.3 that investigated what employees thought was most important in a job. Many of the respondents were willing to give up a $5,000 raise to have a better boss. This shows that fair treatment is a high priority. Finding a good balance between being happy at work and a happy personal life was also important to workers. Many did not take vacation days because of a desire to impress the boss.

Every hardworking American can agree that giving more vacation time, reasonable pay and fairness in the workplace is an enticing offer. Financial hardship may still be an issue from time to time. However, there are some ways to address financial emergencies and hardships. More information about financial strategies and addressing emergencies is available at

  1. Fortune
  2. Zero Hedge
  3. Randstad U.S.