Thursday, September 5, 2019

Economic Effects of Increasing the Minimum Wage

Economic Effects of Increasing the Minimum Wage
By Norah Krause

The first federal minimum wage, established in 1938, was $0.25 per hour. It was one of the aspects of the Fair Labor Standards Act of 1938. Since its introduction, the federal minimum wage has been raised 22 times by 12 presidents. According to the Economic Policy Institute, the federal minimum wage was last raised in 2009. Many states have increased their minimum wages, including California, Massachusetts, and Oregon. Washington D.C. has the current highest minimum wage at $14.00 per hour. Proponents for raising the minimum wage say that it's currently too low to live on and that increasing it will create jobs and grow the economy. Opponents say that many businesses can’t afford to pay their workers more, and will need to lay off workers, close, or reduce hiring; and that raising the minimum wage will increase the price of consumer goods. However, the benefits of increasing the federal minimum wage outweigh the disadvantages.

According to Ben Zipperer, an economist at the Economic Policy Institute, “A national $15 minimum wage by 2024 is an important corrective to ensure that low-wage workers share the benefits of economic growth.” Recent research on the economics of the minimum wage shows that prior state wage increases have had “little to no negative consequences and instead have meaningfully raised the pay of the low-wage workforce.” Three states have a minimum wage of $12 per hour: California, Washington, and Massachusetts. California is expected to increase its minimum wage to $15 per hour by January 1, 2022. As of now, the minimum wage increases in California have not had an adverse effect on its unemployment rate. As seen in this graph, the current unemployment rate in California is 4.1% and the rate has been decreasing since 2012.

Although the dropping unemployment rate may not be due to the increasing minimum wage, it shows that increasing the minimum wage does not directly increase the unemployment rate. The unemployment rate of most states is either dropping or remaining unchanged, regardless of whether a state has a higher minimum wage than the federal minimum wage or not.
Supporters of increasing the federal minimum wage say that the current wage is too low to live on. The minimum wage was designed to create a baseline standard of living for employees. If the minimum wage falls below the living wage of an area, it’s no longer fulfilling that original purpose. According to the Living Wage Calculator developed by Dr. Amy K. Glasmeier of MIT, the living wage for one adult in Waukesha County, WI is $11.65 per hour, $4.40 more than the federal minimum wage. This calculation takes into account expenses including food, medical, housing, transportation, and taxes.

https://youtu.be/-SCB1t28nDU
This video shows the life of a single mother and her son living on $7.50 an hour. She struggles to pay for food, rent, childcare, and health care. Without rent assistance, food stamps, and childcare help, she would likely be living in a shelter with her son. Safiyyah is one of the roughly 1.8 million people with hourly wages at or below the federal minimum. Although they make up only 2.3 percent of hourly workers, their struggles are evident. Many rely on government assistance in the form of welfare programs, like Safiyyah does. Some work multiple part time jobs to cover expenses. According to the House Committee on Education and Labor, an adult with two children is left thousands of dollars below the poverty line when living on the minimum wage. Living on the federal minimum wage alone is impossible. The current wage no longer fulfills its purpose of creating a standard of living for American workers.

The unemployment rates in states that have increased their own minimum wages have not been negatively affected by those changes. This shows that increasing the federal minimum wage is unlikely to increase the unemployment rate. Also, the current federal minimum wage is impossible to live on. These are two reasons that the federal minimum wage should be raised. However, there are many arguments both for and against raising the federal minimum wage. What are some that you’ve heard? How do the two sides of the argument compare?







Works Cited
“Minimum Wage Tracker.” Economic Policy Institute, 12 July 2019, www.epi.org/minimum-wage-tracker/. 

“Pros & Cons - ProCon.org.” Minimum Wage, minimum-wage.procon.org/.

Scott , Robert  C. Raising the Minimum Wage: Good for Workers, Businesses, and the Economy. edlabor.house.gov/imo/media/doc/FactSheet-RaisingTheMinimumWageIsGoodForWorkers,Businesses,andTheEconomy-FINAL.pdf.

“Who Earns the Minimum Wage?” American Experiment, 23 Mar. 2018, www.americanexperiment.org/2018/03/earns-minimum-wage/.

Zipperer, Ben. “Gradually Raising the Minimum Wage to $15 Would Be Good for Workers, Good for Businesses, and Good for the Economy: Testimony before the U.S. House of Representatives Committee on Education and Labor.” Economic Policy Institute, 7 Feb. 2019, www.epi.org/publication/minimum-wage-testimony-feb-2019/.

38 comments:

  1. I generally agree with this article. Most states that have increased the minimum wage do show improvement economically, and as the unemployment rate lowers, more and more people living in those states are benefitting. I do have a problem with this article, however. Most of the cities that have raised the minimum wage, such as California and Washington, are already states with large cities and efficient economic systems, such that they are generally considered the wealthier states. The fact that these are wealthier states ensures that not only can they pay their workers more with little to no effect on their businesses, but also that their cost of living is far higher than average. While $7.25 is not livable in most states, the base minimum wage of these states stands to be essentially the same proportionally, ensuring people working minimum wage jobs are still suffering financially on a similar scale. Thus, this raising of the minimum wage seems out of necessity rather than an experiment that has truly paid off. I raise the question, how could this minimum wage distribution be accommodated to less wealthy states that haven’t raised the minimum wage when their living cost and general statewide income is less?

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    1. This was accidentally under a personal email account. This is Kendall TerHaar!

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  2. Talk of raising the minimum wage never seems to end, but the argument against it I see most often is about the domino effect of raising wages that could occur afterwards. I agree that, in Wisconsin, we should raise the minimum wage to the cost of living, or at least closer to it. If our living wage is $11.65 an hour, then $7.25 is not enough to sustain a life full of living expenses. Government assistance such as food stamps and rent assistance are great tools that can help those below the poverty line maintain a life. However, if we raise the minimum wage by that much, won’t we also have to raise other wages to ensure we are paying properly for a worker’s responsibility and skill? That could cause problems, as companies would have more expenses paying all their workers higher wages. It could lead to a rise in prices of services and goods.

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  3. Raising the minimum wage will hurt every single working men and women in the United States for many reasons. One way this will hurt citizens will be a rise in prices for basic goods. For example, If you work for Walmart and they have a minimum wage of $7.50 and it is raised to $10.00, Walmart must raise their prices on goods to make up for the money being spent on keeping employees. This will affect every business in the United States which wouldn’t change anything other than the cost of living. The ratio from money spent on employees and prices for goods would stay the same, but the worth of the U.S. Dollar would decrease significantly. With a higher minimum wage there will be more unemployment. According to the Bureau of Labor Statistics, the unemployment rate in Wisconsin is 3% in July of 2019. In California the unemployment rate is 4.1% in July of 2019. California's unemployment rate is higher because the minimum wage is so high compared to Wisconsin. Businesses in California can not afford employees like businesses in Wisconsin can because of the high minimum wage.

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  4. I believe that this argument can go either way - there are both pros and cons to raising the minimum wage. So, I believe the government should initiate a plan to change the minimum wage in small steps. Perhaps they could raise the minimum wage ever so slightly for a span of x years, then see if it is actually helping or not. This way, there would be no drastic change, and the government could keep track of the impact closely.

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    1. My biggest concern/ problem is, wouldn't this cause inflation to the economy? If you increase the minimum wage the unemployment rate will go down, I agree with this. But then businesses will have to charge a bit more for each product to be able to pay the difference an hour to achieve minimum wage and theoretically the minimum wage would have to be increased to 20$ an hour because people wouldn't be able to afford the increased goods. Which is ultimately inflation. I say the minimum wage should stay at where it currently is.

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  6. There can be two different opinions on raising minimum wage. There are definitely downfalls to raising it but there are also benefits. I generally agree with this article, because being a teenager and working at a minimum wage job is awful. You try to save up for college, but you don’t have enough time and enough money to do it. With raising it you will be able to have hard working teenagers who will want to work more with the amount they are getting paid. This is also beneficial to any of the families that have to support themselves with a minimum wage job. To support a family, you want to be financially secure and just being paid minimum wage will not get you to a place with security. The downfall can be inflation, the prices of the product would go up, and the income would go down. There would be less people buying the cheap goods they want and minimum wage jobs would be the same exact cost before inflation. I do agree more with this article than disagree because the minimum wage should be raised, to make a better economy for the new generations of our future.

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  7. I agree with minimum wage having to be raised so that people who are just making it from paycheck to paycheck can actually support themselves like what was previously stated with the single mother that had a child only getting paid $7.50 which was far below the federal minimum wage. Forcing her to have to work multiple jobs just to keep a float, not able to spend some quality time with her child.

    Elias N

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  8. The federal minimum wage is improbable to live off of alone, and yet thousands of regular citizens claim that the minimum wage isn’t supposed to be livable off of. If the minimum wage is supposed to have the ultimate goal of allowing adults to live off of it like the government claims it does, then society needs to understand this as well. There’s so many people who believe that adults like them all should have high-paying office jobs, and fail to recognize that not everyone can afford to get the schooling nor experience required for those jobs. If they’re constantly passed up in those higher positions, they have no choice but to work minimum wage jobs. For those reasons, I really believe that the minimum wage should be raised, but not drastically. Too sudden an increase in pay would cause economic problems such as the inflation rate dramatically increasing. If the minimum wage was raised gradually, then society wouldn’t have to adapt to an immediate change, and those adults living off of minimum wage - unable to get another job - would be more able to afford basic necessities. Without the help of governmental services, many families would be even more economically insecure than they are already.

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  9. I can agree and relate to this article. The minimum wage in wisconsin is vastly outdated and needs to be raised. As of right now it is near impossible to live by yourself working for minimum wage. Yes wherever you work can give you a raise but that can take months and maybe even years. If the minimum wage was raised it wouldn't help the unemployment but it would lower that 2.3 percent of workers living in poverty because of their wage. The minimum wage must be raised at a constant rate to keep up with our economy and our inflation. I believe however that the federal minimum wage is only part of the problem and raising that will help very little. Each state is unique. Some have bigger cities than others and some have a higher cost of living. The federal wage can only do so much as to set a low bar. The real change needs to happen within each state as each one is different than the last. ---Charlie B

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  10. I can agree with this stance, I do feel as if 7.25 is way too low in order to pay for living expenses. That being said, I believe that the price of living may increase in states which don’t have a large economically prosperous area like California’s L.A. or Washington’s Seattle if we increased the minimum wage. Overall I think that increasing the minimum wage is a good idea, yet there are some economic setbacks such as state income that sway people to keep the minimum wage the amount it is now.

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  11. Raising the minimum wage is a necessity as the author of the post states. The federal minimum wage is too low to adequately pay for all of the goods and services that are required to function in today's society. Taking a personal look at the medical side of things, making an hourly rate that is close to the living wage in waukesha county of $11.65 but only being part time for 30 hours a week, and not having full living expenses I can not afford a doctors appointment so I legitimately cannot afford to be sick, due to the difficulties of being absent from work as a result. I don’t make enough money for a trip to urgent care unless its an actual emergency, because the cost of one trip can easily go north of $100 dollars and then having to miss at minimum two days of work because I work in (fast) food service. As a result, I think that the minimum wage should be raised to compensate for the missed days that people sometimes have that set them back because they can’t make enough money to compensate for the loss of income.

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  12. I agree, I think it would be a good idea to raise the minimum wage because Safiyyah (the one talked about in the blog) has a hard time living off minimum wage and she isn’t the only one struggling. Other states such as California, Oregon, etc have raised their minimum wage because things are getting more expensive and minimum wage isn’t cutting it, so why doesn’t everyone raise the minimum wage? If you have kids and need to pay childcare and also all of your bills on top of it and most important food as well. It is not easy to just live off of minimum wage. How does the government think minimum wage is okay? There are so many people that have to get to their jobs everyday and drive their kids places, yet how is that even possibly when you can’t afford gas or a bus ticket? Where minimum wage is right now, it is very low and people can’t afford to live a normal life where they can get from place to place and be able to live in a place they can call home.

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  13. As mentioned in Norah’s blog, $7.50/hour is difficult to live on for one adult, much less an adult with two children. Increasing the minimum wage, even by a few dollars, could help an adult pay his or her bills and reduce debt. When speaking of the minimum wage, keep in mind that these employees have families that they need to feed, too. However, it is debatable whether the work that some employees do, for example, retail clerks and factory workers, is worth a larger paycheck. Surely, there wouldn’t be a minimum wage if it wasn’t the equivalent to a decent standard of living. But with a higher minimum wage comes higher labor costs for businesses, and businesses cannot be as efficient without cheap labor (especially if they cannot afford to pay their employees $15/hour). Therefore, expect to pay more for the goods and services that are purchased, because the businesses need to make profits one way or another, whether it is cheap labor or more expensive goods. But if the minimum wage is not going to provide a decent standard of living, then why have a minimum wage at all?

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  14. I agree that we should raise the minimum wage. If the minimum wage is $7.25 per hour, and the cost of living in Waukesha county is $11.65 per hour, then the minimum wage should be raised to meet the cost of living. If a family has kids and both parents are working for $7.25 per hour, that would barely be enough to cover the cost of living. Theoretically, if we raised the minimum wage to meet the cost of living, then the homelessness rate would decrease because people living off of minimum wage would have enough to rent an apartment.
    However, if we raise the minimum wage, then inversely prices would rise because companies would have to make more, in order to pay employees more. This would cause a chain reaction which would make the U.S. dollar worth less. In 1938, you said the cost of living was fairly cheap, however, the minimum wage was increased 22 times by 12 different presidents. Because the minimum wage was increased so many times, the cost of living has increased with it, because the prices were raised, because companies had to pay employees more.

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  15. While raising the minimum wage seems very beneficial, if we look at states where it is raised, not all is good. For example in California the minimum wage is 12$ and though the wage is higher, the cost of living is higher as well. Regardless, I agree with your argument. The cost of living requires us to pay our work force more than $7.50 an hour. Paying workers more means they have more money to return into the economy. If we raise the minimum wage we can lower the amount of aid we give to those in need because they will be making more money. Less food stamps and less government assistance means a more independent and hardworking society.

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  16. While increasing the federal minimum age would benefit those earning under the living wage, it’s important to look at what else that would impact. Holistically, a higher minimum wage would cause inflation, an increase in prices and a decrease in the value of the dollar. This is because it forces business owners to raise the prices of their goods or services due to an increase in spending by workers. If the value of the dollar goes down and prices go up the living wage will also go up and those earning minimum wage will still be earning under the living wage because everything would shift.

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  17. I agree with you, because like you said raising the prices of minimum wage isn’t necessarily going to help the unemployment rate. However raising the prices is beneficial to those who live off of minimum wage. I think raising the prices is beneficial because it’s very hard to pay for items such as food, rent, transportation, medical, and taxes all off of making $7.25 an hour. If you are a parent and have kids on top of that it will be even more expensive to pay for. Also raising the price could even lead to Economic growth because there would be an increase in demand which could help them hire more people for jobs.

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  18. I like that you had many sources to support your thesis. The sources were relevant and good sites to use. It’s also very surprising to think that so many people are below the poverty line with children. They work so hard but still struggle. That’s pretty sad to think about. I also agree with what you said about how people struggle to live on the minimum wage because I can kind of relate to that, when I was little, it was like that for my family. One thing that you maybe could’ve added to your blog was maybe talk about what people make more than the minimum wage and how they don’t struggle because they make a lot of money. You could also compare that to how people struggle with the minimum wage.

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  19. The purpose of the Federal Minimum Wage is to mandate a livable wage for adult Americans. The current minimum wage does not serve this purpose. Therefore, I agree that it should be raised to meet the cost of living. However, raising it to $15/hr by 2024 is not only not a good idea, but it is also not necessary.

    Research shows that past minimum wage increases do not negatively affect job growth. However, all past minimum wage increases have been nominal and graduale. From 1990 to 2009, the minimum wage was increased by $3.45/hr. That is approximately $0.18 per year. If the minimum wage were to be increased from $7.25/hr to $15/hr by 2024, assuming nothing would happen until the start of 2020, the annual average increase would be about $1.94 every year. That is a 1078% larger increase every year than the increases between 1990 and 2009. Plus, there hasn’t been an increase in the minimum wage for 10 years, therefore the market is not used to regular minimum wage increases. The increased proposed is far too drastic and will create more problems than it solves.

    Instead of the current proposal, instead the minimum wage increase process should be drastically changed. Instead of Congress debating when and how much they should increase it, the minimum wage should be tied to the inflation rate. This way the minimum wage should always be where is should.

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  20. I agree that the minimum wage should be raised but with some things in mind. There was a comment made about other states minimum wage, but it costs a different amount of money to live in each state. California naturally has a high minimum wage because it’s one of the most expensive places to live in the U.S. Jobs with minimum wage are usually jobs teenagers apply for and get which might seem a little harsh to say, but it’s reality and raising the minimum wage for a job with the majority of teens would not solve much of the problem. I wouldn’t see a problem with raising the minimum wage to $9.00 an hour but I’ve only made $9.00-$10.00 an hour, so for me I don’t know if I see a problem with raising minimum wage in our area. I would need more data and research from other states to determine what the minimum wage should be. With my experience, I also believe that many places offer above minimum wage and there’s this small competition to get employees based off of the hourly pay rate.

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  21. This is a very well written argument but I’m not sure I’ve been convinced. The main effect of raising the minimum wage you focus on is how it will impact unemployment. You never go into any depth about how prices of goods would be forced to increase, too. If a company has to pay their workers more, then they also have to increase the price of the goods they’re producing. This inflation of goods would put you right back where you started and even decrease the value of the dollar. Minimum wage is generally considered pay for high school students taking a step into the working world. Nowadays, it is not meant for a family of 5 to live on it. There are many things an adult can do to make more money to support themselves and whatever family they might have. For example, getting a job with better pay. The video you selected is of a McDonald’s worker making $7.50 an hour. There are other fast food businesses such as Chick-Fil-A who pays their workers an average of $9.85 an hour. Jobs where no skill is required also generally pay less. I don’t believe the minimum wage should be raised because it indeed does have more negative effects than positive.

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  22. This is a heavily discussed topic and it was interesting to see a factually backed claim as opposed to statements and/or questions about this topic. I appreciated the fact that you included an example of California, Massachusettes, and Oregon raising their wages without any major repercussions. It’s interesting though to think that a minimal change of a few dollars could massively change the economy but when you do the math it adds up. Although many say that raising the minimum wage will raise the prices of goods and services, you have showed throughout that it’s inhumane to not allow even people in Waukesha county to have a livable minimum wage. Even some teenagers who don’t have to pay large bills every month have a hard time making money working a job above minimum wage. Imagine trying to feed a family, pay rent, and have emergency funds as well. It will be interesting to see if the government ever raises the minimum wage massively, does it slowly, or not at all.

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  23. First, I must commend your writing skills, as this blog entry was very well written, and while reading I forgot for a second that it was made by a student. Great job on that. As far as your content, I agreed for the most part, and your information was very convincing. Yes, minimum wage is too low currently, but raising it to 12-15 dollars is a bit excessive. In 2009, the minimum wage was raised from $5.15 to $7.25, which was done rightly so. According to usinflationcalculator.com, $7.25 in 2009 is now equal to $8.67. This shows there is no need for raising it to some crazy number like $12 or $15, but simply something like $8.75 or $9.00. One issue I have with raising the minimum wage way higher is that is will lessen the value of high-end jobs, since people working at a McDonald’s drive-thru will be making closer to the people who spent thousands on college degrees and worked hard on their education. Raising the minimum wage to 12-15 dollars would create an epidemic of all employers having to raise the wages/salaries of their non-minimum wage workers, which would be difficult. There isn’t a median wage that people work off of, so how do employers know much do increase one’s wage by. Say someone is working for $28 an hour, and a minimum wage employee is making $7.25. The $28 an hour worker let’s say is an accountant. Now minimum wage is raised to $15. The account who once was making 4 times as much as the McDonald’s drive-thru worker is now only making less than twice as much. Raising the minimum wage drastically nationwide would throw off the economy and lessen the value of high-end jobs.

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  24. I agree that raising the minimum wage would an effective method for allowing Americans living in impoverished communities to live at a higher standard of living and open up more possibilities for them to explore; however, I wonder if there are seriously no drawbacks to raising the national minimum wage. The example you used in the article, California, seems to be doing very well off with an increase to the minimum wage, which I'm sure hundreds of thousands of people are enjoying the benefits of right now, but what about the future? I just wonder how the economy will adapt and change in the long term after making these implementations

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  25. I believe the minimum wage is too low of some states and places for people to make a living day to day. But the amount for minimum wages should be higher to make it so families can make ends meet and not have to live check to check, but they should also make the wage as high as it can be before unemployment rates go back up and then it solves the problem of people making more money, but then people aren't making more money, they are out of a job. Those with the wages higher are enjoying it and will be but once in the future people start getting fired for the high wages it will cause a problem but until then people will just continue to enjoy it.

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  26. Overall, I agree. The blog claims "the benefits of increasing the federal minimum wage outweigh the disadvantages," which is true. In general, good things will come with some bad things always. In this case, raising the federal minimum wage would do more good than bad. Raising minimum wage doesn't only affect the people who are working though, but it also impacts other things as well. You made a good point that raising the minimum wage would help people with things like paying for food, rent, childcare, and health care, but, I would've liked to hear more depth about the people and economy outside of the general employees.

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  27. For me personally, I think this entry brought up a lot of interesting points about why the minimum wage should be raised, and based on that evidence I would agree with the proposal to at least bring it up to the minimum living cost of roughly eleven dollars, because that one doesn't even take into account some very crucial expenses. However why is this not being done? I would like to know why this isn't being done if it is such a good idea. Is it corporate greed? Slow government response? Other things? I think it would be interesting to find out why this has not been done when it clearly in your eyes is a good idea.

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  28. Agastya Asthana

    I see where you are coming from to increase the minimum wage but the minimum wage is not a number, its a ratio. Increasing the minimum wage means that the average consumer prices will end up going up so the minimum wage would not be enough, this cycle could keep going, for example, if a worker is paid a minimum wage of $100, but the price of a loaf of bread would be like $125 so it makes no sense to increase the wage. Companies need to make profits to stay in business, so if they start increasing minimum wage, then they would spend more money than they would earn and ultimately lead to their downfall.

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  29. I think that minimum wage should be increased like your article states because the minimum wage should at least be enough for one person to live off of. I especially feel this way for big companies because the owners can make millions of dollars off of their company, but only pay their employees $7.50 an hour. The owners should reinvest some of their money into the company by paying their employees more, and maybe this can encourage the workers to be more productive and bring in even more revenue. Maybe there could be different minimum wages based off of the employee's age, number of people depending on the employee, and how much money the company makes. This way, large corporations can't just bring in all of the money for themselves, but instead can help their workers stay above the poverty line.

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  30. I feel like I'm definitely just adding to the other comments of being increased. But, I feel like everything else has a raised price (gas, food, living situations). On top of it, having a phone. Phone companies don't even hold phones from 5 years ago. People who do not get paid enough have a hard time staying on top of things and paying for everything. Especially at our age, companies use teenagers for their pay. We will work how many hours at only $7.25. Other jobs that pay more for starting wage are even harder to become a part of and get in too. Great piece to write about. Great job!

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  31. I really like how the point of view of the single mother with a son really sold this piece. I think that it puts a real life aspect on it that you wouldn't get with numbers. In the United States there are so many people that are poor. I think that this piece was very convincing in that way to really bring out the emotion from the hourly wage. How painful it is to see that no matter how hard or long you work sometimes it is not enough. You said that the minimum wage was going to be brought up to 15 dollars but from where all of the 50 states or just a couple.

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  33. Minimum wage is a highly discussed topic and the evidence you included definitely assisted in giving a general outline of the situation. I agree that minimum wage, at the amount it is at now, is definitely not enough for people who are trying to expand their families. The point you brought up that stood out most to me was "As of now, the minimum wage increases in California have not had an adverse effect on its unemployment rate...the rate has been decreasing since 2012." I find this very beneficial to the argument because one of the biggest reasons people are against raising the price is due to the thought that people will lose jobs. However, in states that may be as populated or have as great of economic statuses, do you think the increase of wages may impact them negatively? Another aspect of this article that stood out was the example of the mother and her son. It is so unfortunate that there are a majority of people who are forced to depend on others or work endless hours just to afford enough food on the table. Raising the minimum wage is risky, but could have a positive outcome.

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  34. I totally agree that the minimum wage is far too low to live on right now, it’s interesting to hear about the impact of raising it would be. Currently, I feel like the general societal standpoint is that minimum wage shouldn’t be raised, especially by older people who haven’t had to work a minimum wage job in a while. It used to be true that working a few summers of minimum wage could pay for a college tuition, but with the hyperinflation going on for tuition makes that impossible, so I think this could help a lot of people.

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  35. I think minimum wage should be raised, at least five dollars. I think in wisconsin that minimum wage is way too low, at 7.25. That definately isn't enough money to live on. It should be like 12.50 in my opinion. ALso, taxes are too much in general, so you should be getting paid more.

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