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How the raise in minimum wage impacts unemployment

On Behalf of | Apr 21, 2023 | Wage & Hour Law

When the federal government established a minimum wage of $0.25 per hour in 1938, policymakers began debating the impact that minimum wage would have on employment. Today, the federal minimum wage is $7.25 per hour. Residents of California should also understand how the minimum wage, and its potential increase, impacts unemployment.

Difference in state and federal minimum wage

While the federal minimum wage requirements increased to $7.25 in 2009, the federal government allows states to set their own minimum wage as long as it is not less than that amount. For instance, in California, the minimum wage for non-tipped employees is $15.50 per hour.

According to wage and hour law, individual employers can set their own minimum wage, but their minimum wage must not go below their state’s level.

What if the federal minimum wage raises?

While many people believe that a federal increase to $15.00 per hour is the right choice, there are some drawbacks to consider. For instance, according to studies, 27 million people stand to benefit from a $15.00 minimum wage. However, the same study reports that the increase would eliminate approximately 1.3 million jobs nationwide.

How minimum wage impacts unemployment

Policymakers fear that unemployment will increase if the minimum wage does. Those policymakers fear that if employers must pay employees $15.00 per hour they will hire fewer employees. Technological advances also present a risk as employers may choose to automate certain parts of their business operations.

Increasing the federal minimum wage presents a wonderful opportunity for millions of Americans. However, it’s important to consider the negative consequences that may result from the increase too.