President Biden started his term by signing many executive orders aimed to shape American society for the next four years. Some of the orders laid the groundwork for the $15 minimum wage proposal. Many college students hold minimum wage positions, and executive actions like this one would greatly impact students' economic stability. Sure, a pay raise to $15 an hour sounds nice, but the long-term negative effects outweigh the short-term positive ones, such as the amount of low-skill jobs available would decrease and small businesses would face challenges in order to accommodate it.
According to Isabel Soto, the director of Labor Market Policy at the American Action Forum, raising the minimum wage would decrease the number of low-skilled jobs available, which would cause an average of 1.3 million jobs to be lost by 2025. If the minimum wage were to increase to $15 an hour, small businesses would have to cut employees because they could not afford to pay every current employee that much. Employers would have to switch from having more employees who are paid less to have fewer higher-paid employees.
According to Senator Rand Paul (R), "When the minimum wage is above the market wage, it causes unemployment." The unemployment rate is the percent of individuals actively looking for work but cannot find it in most cases. Raising the minimum wage could increase the unemployment rate due to the number of jobs that would be lost and could cause some small businesses to struggle. Paul said that an increase in the minimum wage would cause nearly four million jobs to be lost. According to Business Insider, the most affected group would be teenagers. Increasing the minimum wage would put unnecessary financial hardships on teenagers and college students alike. With the loss of jobs in the market, teenagers and college students would not be prioritized over other individuals for low-skilled jobs because those individuals would probably need it more. A possible increase in the unemployment rate would be harmful to the economy causing unnecessary economic stress.
These small businesses have to keep up a good reputation within their local communities and are often the center of community events. They do not have the same popularity and benefits as major corporations, so keeping up with their local community is their strongest method of bringing in customers. Their status could be negatively affected by the lack of employees and the loss of profit. For instance, Andrea Knight, the owner of The Noshery Bakery in Denver, Colo., says the biggest struggle that she faces each year within her business is determining how to accommodate the continual rise of the minimum wage. She says that she often thinks about cutting the quality of goods, taking a financial hit, or moving employees from full-time to part-time. "I have had to really take a look at our staff and go, do we have to bring someone down to part-time? And that's heartbreaking," Knight said. This would be the case for many small businesses as they are affected more by market policy changes than big businesses due to only a couple of revenue sources.
A common argument for raising the minimum wage is that it would benefit individuals who live off minimum wage earnings by increasing their income. As socially conscious students, many understand that $7.25 an hour is barely enough to support one's self; however, the U.S. Small Business Administration finds 99.7% of U.S. employers are small businesses and are responsible for the creation of 64% of new jobs in the private sector alone, meaning that more people have minimum wage jobs. This is a better alternative to fewer people having jobs.
Increasing the minimum wage will greatly hurt small businesses because adding long-term additional expenses without ample revenue to support it might make it more difficult for them to succeed. The minimum wage would decrease the amount of low-skilled jobs available, and many jobs would be lost, causing the unemployment rate to increase. Raising the minimum wage would threaten small businesses' well-being to accommodate the change in wages, and having more minimum wage jobs that pay less is better than having fewer total jobs that pay more. The long-term negative effects of increasing the minimum wage outweigh the short-term positive ones.