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Editorial Team
22 Feb 2019

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Minimum Wages Are Causing Maximum Discomfort. Hustle Up Reality Check!

raising minimum wages

19 states in The U.S. increase their minimum wages, by 2024 Federal minimum wage will stand at $15

What is common between Alaska, California, Arkansas, Vermont, South Dakota, and Minnesota apart from being U.S. States? Truth to be told there can be many similarities, but here we are talking about raising minimum wages. With the last Congress sanctioned minimum wage increase going a decade back, this can be one of the most welcome changes of 2019.

The ‘Fight for $15’ advocates who have successfully pushed their movement (in many cities) for raising the wages for low-paying sectors like fast-food, childcare and airlines will be a happy lot. The state increasing the minimum wages is just the icing on the cake to Raise the Wage Act 2017 – legislation that plans on raising the federal minimum wage to $15 by 2024.

And it will be no exaggeration to say that it was about time and in all honesty may be a bit over time for the ‘next’ federal wage raise. The Fair Labor Standards Act might have very well missed the mark by decades. Lawmakers unwittingly turned on the corrosion switch on the minimum wage. The takeaway - a reduced purchasing power and longer hours at work to get at the base of what we know today as a decent living. The dip in the value of minimum wage started in the 1980s and today it is 25% less in value after adjusting inflation than it was in 1968 (the peak).

Raising the minimum wage will reverse the effects and bring a pay parity between state, federal and private employees. An increased purchase power with a fair job market spells well for the current economy.

Talking about its impact in numbers, a $15 minimum wage by 2024 will give 22.5 million workers a direct wage lift and if you add up the people who will be indirectly getting a raise to the list, the number is 41.5 million workers aka 29.2 percent of the wage-earning workforce.

And since we are talking numbers here are a few more:

  • The employees directly affected by the raise will get a 31.3% annual raise, amounting to $5,100, provided they are full-timers.
  • And indeed an overwhelming number of them (read 2/3 of them) are full-timers with the average age hovering around 36 years old. The wage increase brings sunnier days to 55-year-olds and older workforce. The effect on youth on the other side of the spectrum is yet to show but on the cards.
  • It will be no surprise that the “white Caucasian male” will benefit from the wage rise, but not more than women who are 55.6%, Hispanic workers who are 40% and African American workers who are 33% of the impacted workforce.
  • The impacted population is parents to 19 million children in the U.S. and a wage raise will give their education and standard of living a boost.

The Case of Independent Contractors and Exempted Employees (California)

The State of California is bright and sunny when it comes to worker wages and that applies to the exempt employees, who are people whose jobs do not fall under one or many subsets of the federal requirement. So, if you work for an organization that is a small family of 25 people or less, you are pretty much an exempt employee. And in California, they are bound to earn twice the minimum wage set by the state. Both blue and white collars will not mind this change.

Independent Contractors aka the ones who do not come under employer’s rules and directives will continue to work for pretty much the same compensation.

The Federal verdict is out, but there are state and local minimum wages and many of them are a notch or two higher than their federal counterpart. A wage increase will ripple through ranks and lift wages across various segments, creating a fair job market. Raising minimum wages will have a layered effect and the entire picture is yet to come to the forefront. Its overall effect on macro-economy will be interesting to see.

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