Minimum Wage in Rhode Island, Essay Example

Over the past couple of years, liberal politicians have been talking about increasing the minimum wage in the state of Rhode Island to $10.10 per hour. Some arguments that are considered involve issues such as the notion that nobody who works a full 40 hour work week should be living in poverty, and that it is virtually impossible to financially support a family on the current minimum wage of $9.00 per hour. While many would agree with these assertions, but that does not change the economic perspective of the increase in Rhode Island’s minimum wage being an adverse idea. (Skinner, 2014)

Rhode Island Representative David Bennett has proposed a new bill to increase the hourly minimum from $9.00 to $10.10 per hour. If passed, the raise would become effective at the start of 2016. This is the second time in the past year that Rhode Island has considered raising their minimum wage. The Warwick Democrat was able to increase the minimum wage from $8 to $9 in 2014. Rhode Island Governor Gina Raimondo has acknowledged that he is in favor of the new bill to go into effect come 2016. Rhode Island’s Department of Labor and Training reports that roughly 45 thousand of state residents are working for the current minimum wage. This makes up about 8 percent of Rhode Island’s labor force. (Press, 2015)

Now liberal parties have a tendency to view minimum wage as an economic impairment on the blue collar labor force. However, minimum wage is actually an opportunity for people to jump start their careers. It is not until skills are progressively developed, and after a higher education is obtained, that a worker should expect to start earning beyond minimum wage. In many cases where workers have obtained relevant skills and an education, they are able to earn substantially more than minimum wage. (Melissa Kearney, 2014)

The argument that one working for minimum wage is unable to financially support a family suggests that minimum wage should be designed in a way where workers can support their families. However, minimum wage is not meant to support an entire family, it is meant to protect the labor force of workers without families that are in the process of trying to financially stabilize themselves so that they may one day have a family. If a person is only making minimum wage, then it is not logical for them to start a family if they are unable to ensure their children’s financial stability. A minimum wage worker that ignorantly chooses to have a family should not hold the government liable for their incompetent decision.

Raising minimum wage impacts the rest of the economy in a negative way as tax dollars, employers’ costs, and products rise in order to compensate the lost money that was allocated to it. Consider a simplified yet realistic economic scenario. There is a small business in Rhode Island that employs 10 workers that earn the current minimum wage of $9.00 per hour on the 40 hour work week. Each employee’s annual salary would amount to $18,720 based on the 52 weeks in a year. This amounts to a total of $187,200 for the entire payroll of the 10 employees. If minimum wage rises to $10.10 in 2016, each employee’s annual salary increases to $21,008 annually. This amounts to $210,080 for the entire payroll of the 10 employees. This is an annual increase of $22,880 for the employer, but on the state scale, such increases would be much more dramatic. An increase in labor cost may force an employer to lay off some of their employees, which contributes to the unemployment rate. (Melissa Kearney, 2014)

Rhode Island Senator Leonidas P. Raptakis motioned that the increase in minimum wage would impair businesses as well as younger people looking to enter the workforce as employers are likely to be reluctant in hiring them at increased costs in salaries and wages expenses. Cranston Mayor of Rhode Island Allan Fung stated that he does not feel that it is the right time to raise minimum wage. He further supports his views by arguing that small to medium sized businesses (SMB) are already suffering from the previous raises in Rhode Island’s minimum wage from the past two years. Increasing Rhode Island’s minimum wage for the third year straight would become too heavy of a cost load for these SMBs to handle and would ultimately result in job loss. (Gregg, 2015) (Skinner, 2014)

It is heavily advocated that raising minimum wage would stimulate Rhode Island’s economy in providing more purchasing power for consumers. However, this is an inaccurate claim as a raise in minimum wage would also raise the prices of virtually all products and services. Employers will already incur substantial increases in their salaries and wages costs from a rise in minimum wage, these costs need to be paid for. Such costs are funded either by laying off employees, boosting prices, or a combination of both. If Rhode Island’s minimum wage does rise to $10.10 per hour, and continues to rise annually as the rate of inflation would suggest, then this will be detrimental to businesses, workers, taxpayers, and the entire state. (Melissa Kearney, 2014)

Bibliography

Gregg, Katherine. Raimondo seeks raise in R.I. minimum wage to $10.10 an hour in 2016 + Poll. 9 March 2015. 18 April 2015 <http://www.providencejournal.com/article/20150307/NEWS/150309450/?Start=1>.

Melissa Kearney, Benjamin Harris. The “Ripple Effect” of a Minimum Wage Increase on American Workers. January 2014. 18 April 2015 <http://www.hamiltonproject.org/papers/the_ripple_effect_of_the_minimum_wage_on_american_workers/>.

Press, Associated. Rhode Island lawmakers consider raising state’s $9 hourly minimum wage to $10.10. 5 February 2015. 18 April 2015 <http://www.foxbusiness.com/markets/2015/02/05/rhode-island-lawmakers-consider-raising-state-hourly-minimum-wage-to-1010/>.

Skinner, Curtis. Rhode Island governor signs minimum wage increase. 3 July 2014. 18 April 2015 <http://www.reuters.com/article/2014/07/03/us-usa-rhode-island-minimumwage-idUSKBN0F82AK20140703>.