By Richard Yu and Langston Swiecki
One of the few economic issues that affect high schoolers is the minimum wage, as students who work often work at or around this limit. Per a measure that the State Senate and State Assembly passed on March 31 and that California Gov. Jerry Brown signed on April 4, the California minimum wage will increase gradually over six years to $15 an hour by 2022. This will be a $5 increase from the current $10 minimum wage, which went into effect on Jan. 1 of this year.
Junior Oliver Cheng believes that the increase in minimum wage will benefit the economy. He says, “I think it’s great. The economic disparity will no longer continue to be driven apart.”
The minimum wage is meant to help workers by establishing a lowest threshold standard of living and setting a fair price for labor, so it serves as more of a hypothetical number as opposed to something a vast number of Americans work at.
This being said, a number of people earn marginally more, and according to the Economic Policy Institute, up to a quarter of the workforce in the United States is working for $10.55 an hour or less. Raising the minimum wage also increases the expectations of those who are working right above it, applying a similar upward pressure on their wages, which could raise the living standards for many and provide workers who are new to the workforce with additional funds for their activities.
Sophomore Tommy Farahani believes that this minimum wage increase will benefit students such as him. Though he does not currently have a job, he plans to get one later. He says, “This might affect me personally by making it easier for me for some necessary things such as school related items, shopping for new clothes, shoes, and household items.”
In a perfect market system, an equilibrium price for the lowest kind of labor will be reached, for the workers will decide upon where to work and businesses need to offer a competitive wage to stay in the running. However, the real world is not like this, namely because jobs are constrained by location and workers are not highly mobile or aware of their alternatives, providing businesses with some leverage with which they can take advantage of their laborers, and this is where the minimum wage can help.
However, despite potential benefits of the minimum wage increase, the Aragon community is still skeptical.
Junior Naseem Salim says, “I feel like in regards to the Aragon community, … although the purpose of the increase in minimum wage is to close the income equality gap, a lot of businesses might want to increase their prices or hire fewer people because they’re paying their employees more, so it might have some negative effects while it’s an attempt towards progression and positivity.”
When considering the rise in the minimum wage, it is important to think about where the money is coming from, which would be the businesses who employ workers at or around this lower limit. In an optimistic view, the wage increases will simply cut into profits and everything else will remain the same, which is truer for large corporations that utilize the economics of scale, which essentially relates a higher total volume of goods produced to a lower cost per unit of this good, to yield massive profit margins.
However, for small businesses that do not have massive profit margins, doing nothing in response to a rise in the minimum wage can cause economic hardship, which will prompt either an increase in prices or a decrease in full time jobs offered. These would both harm the work force, either by increasing unemployment of decreasing the purchasing power of their new wage, as they would be forced to pay more for some goods.
Cheng asks, “Wouldn’t living expenses go up too [by 2022]? I think the minimum wage increase is good but that there might be future problems that may arise.”
Salim adds, “There are uncertainties such that we don’t know how businesses may react to it, so we’re kind of uncertain as to how people might be affected by it.”
Speculating on the possible outcomes of the minimum wage increase, Cheng comments, “Overall, the company expenditures will be higher, which is not necessarily bad because CEOs get a really high wage … However, there are definitely going to be companies that will fall because of this because they won’t be able to afford it. People are going to get laid off.”
Salim says, “I don’t think the minimum wage increase might have much of an effect because there’s a lot of inflation that’s going on, and increasing the minimum wage will mostly just balance things out rather than serve as a benefit towards employees.”
Assuming that the relatively low inflation rate the U.S. has been experiencing continues, the value of $15 in 2022 will only be worth about $13.80 at the present time.
A possible contributing factor to the feasibility of implementing this increase of minimum wage may be California’s political ideology. Comments Salim, “I think that California is a very progressive state at the moment because it is beginning to pass a lot of acts that help the people, such as the recent physician[-assisted] suicide act that they implemented to help people, so I think that it’s just the way our state is working right now, and I think it’s a good thing.”
Relative to other states in the United States, the $10 minimum wage is already one of the highest in the country.
Says Salim, “I think it’s definitely necessary to prevent people from being unable to afford certain things, but I don’t think the minimum wage increase might have any necessarily positive or particularly negative outcomes, but the only way that we can actually know the results is after it has been implemented.”
