Anit Patel

12-1-15
Essay 3

Impact of Minimum Wage

The problem we are confronting is, what would happen to the economy if the
minimum wage were increased? A minimum wage is the lowest amount an employer can
legally pay an employee for any job. There are some exceptions such as, a waiter is paid a
smaller amount and their tips cover the rest. We will cover how Seattle recently increased
their minimum wage, and how Chicago is planning to have two minimum wages, one for
the city of Chicago and the other for the rest of the state. The history of minimum wage
has had its ups and downs.
The first talks of the minimum wage in the U.S. was in 1912 in Massachusetts.it
was designed to give a minimum wage for women and children. By 1920 at least 13
states plus Washington D.C. had passed minimum wage laws. Many times the laws were
considered unconstitutional due to the fact that it would prevent employers from creating
their own wage contracts with their employees. The first time a national minimum wage
was set was in 1933 with a $0.25 per hour minimum wage. Later in 1935 the minimum
wage was removed due to Schechter Poultry Corp. v United States. In that case the
United States Supreme Court declared the minimum wage unconstitutional. In 1938 after
congress had passed the Fair Labor Standards Act, the minimum wage was reintroduced
at the same rate of $0.25 an hour. In 1941 United States v. Darby Lumber Co upheld the

Fair Labor Standards Act and minimum wage stating that congress had the power to
regulate employment conditions.
In 1968 the minimum wage was at its highest value of $1.60 per hour, which is
$10.88 in 2014 dollars. Congress later gave states the power to set minimum wages that
exceeded the federal ones. By July 1st of 2010, 14 states had raised their minimum wages
above the federal ones. Some counties and cites have their own minimum wages that are
higher than the states that they are located. Santa Fe, New Mexico had the highest at
$9.50 per hour until San Francisco, California increased theirs to $9.79 in 2009. The
minimum wage in real terms has been decreasing since 1984. Using 1984s minimum
wage of $3.35 an hour as the base year, the real minimum wage in 1995 would be $2.90,
$2.74 in 2005 and $3.23 in 2013.
A group of cities, mainly Seattle, are starting to apply a citywide minimum wage
that took effect recently on April 1st of 2015. The mayor of Seattle sighed the legislation,
passed by the city counsel that will increase the citys minimum wage to $15 an hour. It
will be phased through over time. The size of the business will determine how long they
have to increase their minimum wage to $15 an hour. Employers with five hundred or
more employees must have raised their minimum Wage to $15 by January 1st of 2017.
The employers will have to increase their minimum wage each year until they reach the
target rate of $15 an hour. Businesses with the same amount of employees but pay
medical benefits must have a minimum wage of $15 by January 1st of 2018. However, in
this case the business will only have to raise the minimum wage $1.50 until the target rate
is reached. Businesses with less than five hundred employees will until January 1st of

2021 to reach the minimum wage of $15 an hour. Once the minimum wage of $15 is
reached any future increases will be tied to consumer price index or CPI.
Seattle is not the only city to set their own minimum wage. Chicago is trying to increase
their minimum wage to $13 an hour by July of 2019. In early December of 2014 the
Chicago city counsel approved a plan to raise the citys minimum wage by a vote of 44-5.
The rate in Chicago would go to $10 an hour by July 1st of 2015. The state of Illinois is
working on a bill that would raise the minimum wage to $9 an hour July 1st of 2015. The
minimum wage would increase $0.15 each year until the target minimum wage of $11 is
reached in 2019. If both become a law, it would mean there would be two separate
minimum wages in the state, one in Chicago and another for the rest of the state.
Some say that increasing the minimum wage would have an adverse effect on the
economy. As we stated above, Seattle is one of the cities that has increased their
minimum wage. Four restaurants in Seattle have closed before the minimum wage law
was enforced on April 1st of 2015. The restaurants closed because they would not be able
to afford to pay their employees that much money. Some business owners, including
those who already pay their employees $15 an hour or more, have said that the new wage
will be paid by consumers in higher restaurants and retail costs Some Seattle businesses
have started paying their employees they $15 an hour minimum wage before the phasein. one of the businesses is a local restaurant chain that is paying their wait staff $15 an
hour with no tips. Several Seattle companies have jumped ahead of the phase-in and are
already paying their employees a minimum of $15 an hour, including local restaurant
chains Ivar's. Ivar's, a local seafood restaurant chain, announced they would experiment
with a $15 wage with a no tips policy to see what their customers thought Some

organizations and franchises have said they will be fighting the new minimum wage law
in Seattle, saying it does not treat them as small businesses. The International Franchise
Association and five Seattle franchises have vowed to fight the new law, saying it
discriminates against franchises and doesn't treat them like small businesses as they feel it
should
The other side says that an increase in minimum wage would not only help the
employees but the businesses as well. Others have said they expect the new wage will
give workers more buying power and bring enough new business into their doors to make
up for the increase in labor costs (ABC News, 2015). In Chicago, a supporter of the
minimum wage bill says that it will help everybody. The supporter, Sen. Kimberly
Lightford, said in an interview This bill would do a little bit of what the house wants and
a little bit of what we want. Its taking into consideration everybody. Its on of those that
nobody loves, but how can you hate it, right? Because everybody gets some of their
concerns addressed They want to help the businesses adjust to the new law, so they
added measures to do so. The state measure also would include tax credits to benefit
restaurants and retailers
We believe that an increase in the minimum wage would hurt the economy, rather
than help it. As we stated previously, businesses will have to raise their prices to afford to
pay their employees $15 an hour. Some businesses would not be able to exist with a pay
rate of $15 and will have to close. Four businesses in Seattle have already closed because
they knew they would be able to afford the new minimum wage. That is not good since
many people lost their jobs due to the businesses closing. Also Seattles minimum wage
law counts franchises as large businesses, since they are part of a larger corporation.

However, franchises are usually run by families with a little help from the corporation
they are apart of. For example, a person can buy a franchise from McDonalds, and
McDonalds makes sure they are doing well.
In short, minimum wage was designed to prevent businesses from under paying
their employees, but it is not designed to be a living wage. Increasing the minimum wage
may be a good thing, however it prevents businesses from growing and being able to hire
more employees.

Works Cited
Garcia, Monique. "New State Minimum Wage Plan: $9 next Year, $11 by
2019." Chicagotribune.com. Chicago Tribune, 2 Dec. 2014. Web. 10 Dec. 2015.
<http://www.chicagotribune.com/news/local/politics/chi-new-state-minimum-wage-plan9-next-year-11-by-2019-20141202-story.html>
"Correction: Seattle Minimum Wage Story." ABC News. ABC News Network, 3 Apr.
2015. Web. 10 Dec. 2015. <http://abcnews.go.com/US/wireStory/correction-seattleminimum-wage-story-30090454>
"$15 Minimum Wage." Mayor Murray. N.p., 06 May 2014. Web. 10 Dec. 2015.
<http://murray.seattle.gov/minimumwage/#sthash.xZe9KxlN.dpbs>
"Wage and Hour Division (WHD)." Minimum Wage Laws in the States. U.S. Department
Of Labor, 24 Feb. 2015. Web. 10 Dec. 2015.
<http://www.dol.gov/whd/minwage/america.htm#CNMI>