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Short changed?

Minimum wage debate reveals underpinnings of economic recovery

By Talee Mabe
On April 16, 2013

 

During President Barack Obama's 2013 State of the Union address, he proposed raising the current minimum wage from $7.25 per hour to $9 in 2015. This proposed change has sparked speculation as to its results.

Using the slogan "can't survive on $7.25," New York City workers recently held strikes in protest of the current rate. These sentiments have been more widespread as workers have used minimum wage-earning positions to bridge gaps in their personal finances.

While opinions differ on the actual impact of the proposed change, its main motivation is clear.

 "Raising the minimum wage will put more money in people's pockets," according to Dr. Emmanuel Asigbee, professor of economics at Kirkwood Community College.

Asigbee said he believes that the minimum wage is not at pace with the rate of inflation, keeping some workers below the poverty level. This disparity often results in a greater need for government assistance, a problem which, according to Asigbee, could be remedied by the raise.

Asigbee noted the benefits of increased employee morale resulting from higher earnings.

 These will ripple through the economy, according to Asigbee, in the form of increased productivity and greater demands for goods, thereby fueling more profits from business.

 "With more money you can buy more goods," he said. "If you buy more goods, (businesses) are going to be producing more and turn that around to employ more people."

Todd Saville, instructor of business education at Kirkwood, noted that a future increase could extend the recovery out to more consumers.

Saville noted the signs of recovery that are apparent in other sectors. However, Saville stressed, "If the wages are stagnant, that still puts a large portion of the population in the same place it's always been."

"It's hard to get ahead when that's the case," said Saville.

Saville mentioned options available to businesses to offset these impacts that are not as feasible for workers, with banks promoting low interest rates on loans.

Both Saville and Asigbee acknowledged that the minimum wage raise would be hard to swallow in the short run, raising the possibility of increased inflation and hesitation on the parts of businesses. However, Asigbee said that he believes that the impact will not derail a recovery.

 "At the end of the day," said Asigbee, "we have to look at this from a long-term perspective."


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