Social Economic Impact with Higher Wages

Do the benefits outweigh the drawbacks?

Currently in CA the minimum wage is $9.00 an hour and will increase to $10.00 by January 1st, 2016.  By raising the state minimum wage it also increases the minimum salary level required for employees who are exempt from overtime.  Those considered “executive,” “administrative” or “professional” employees must be paid a salary of at least 2 times the state minimum wage to be considered exempt from state overtime laws.

The hope is that by increasing federal and minimum wage it will create new opportunities and thousands’ more new jobs, lifting people out of poverty and closing the income gap. The increase would also lower spending on public assistance.  State and local governments would also receive more in revenue.

Let’s take a quick look at both sides of the social economic impact-

Whilst a promising outlook for employees making the new minimum wage, it could add an additional financial strain to any small organization or business stifling company growth.  To me it raises the following points:

  • Will it reflect employment levels?
  • Will companies now hire less people to compensate?
  • Will this wage increase be passed onto the consumer?
  • Who will ultimately pay for the increase in wages?

Reduced demand leaves people still searching for work and income. Is the wage increase improving the quality of living or just merely reflecting the rise in cost of living and inflation, leaving the lower class in the same social economic class?  As we know with trends Markets level themselves out.   

  • Is raising minimum wage going against the invisible hand?
  • Is it sustainable?

On a positive people will have disposable income therefore generating more spending and commerce. 

  • Will businesses see a positive effect from increases wages?

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