Will the increase in minimum wage increase the already high cost of living?


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Alyssa Johnson, Writer

The increase in minimum wage that occurred in 21 states as of January 1, 2020 was most likely to help those struggling with the cost of living. Unfortunately, the intended effects will not last for long. As small businesses now must increase wages on already limited income, employers may cut jobs or reduce hours. Large companies will probably follow a similar path by cutting hours and staff, as well as raising the price of goods and services.  The rise in the price of living will bring everyone back to where they were before as companies are unwilling to lose money.


There are undeniable benefits of the idea of raising the minimum wage. “Raising the federal minimum wage will also stimulate consumer spending, help businesses’ bottom lines, and grow the economy. A modest increase would improve worker productivity, and reduce employee turnover and absenteeism. It would also boost the overall economy by generating increased consumer demand,” said the Committee on Education & the Workforce Democrats. 


The urge to spend more after getting a raise is common for many people, because of this they are more inclined to make large purchases such as homes or a new car. The intention to be able to regularly make payments is almost always there, but once the price of goods and services takes a rise, individuals are back in the same situation before, just paying more for everything at the same rate. 


The requirement of a higher pay could result in workers being laid off, or even making less than they did before. Eric Rosenbuaum of CNBC said, “60% of big US corporations say a headcount reduction is coming in 2020.” 


The possibility of many people losing jobs, those that do keep their jobs making high expense purchases, and the overall increase of goods and services do not look promising. The increase in the price of goods may affect some on a more national level. States that did not receive minimum wage increases may be seeing higher prices in not only their local grocery stores, but also in general. 


According to the USDA Research Service, “food at home” prices are expected to increase between 0.5% and 1.5%, whereas “food away from home” is expected to increase between 2% and 3% federally.


As the economy has been doing well, stocks have been high, and unemployment is at a low, these factors all have a plausibility of contributing to an economic recession. 


Some people, however, do not see a recession possible within the near future. Paul Davidson of USA Today said, “Economists believe a recession that starts next year would probably be relatively short and mild – more like the slumps of the early 1990s and early 2000s than the devastating collapse that led to nearly 9 million job losses during the Great Recession of 2007-09.” Many say any recession that could occur would not be as detrimental as the last ones experienced from 2007 to 2009. Davidson said “Cristian deRitis, deputy chief economist at Moody’s Analytics said, “We have the capacity to absorb a recession, restructure and see growth recover.” “


Increase in minimum wage across 21 states may be extremely beneficial for working Americans, but has the possibility to have minor or even negative effects on the economy and individuals throughout the affected states. The plausibility of a recession does remain, but only time will tell if things really have changed, or if living really did just become a bit more pricey.