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Your Take: Should We Increase Minimum Wage?

In President Obama’s State of the Union address last week, he talked about increasing minimum wage to $9 an hour [3] over three phases. The last time minimum wage [4] was increased was in 2009 (effective Jan 1, 2010) when it was bumped up to $7.25. Even bigger was the call to tie minimum wage to inflation, which is something we should do for everything (didn’t we learn anything from AMT and the million other non-inflation indexed numbers?).

I get the argument against raising minimum wage, it hurts job creation and increases costs. When you increase labor costs, businesses don’t hire as many people if they want to keep the same profit margins. You don’t automagically earn more when you add employees and you certainly don’t earn more when you simply up their pay. Business owners don’t like minimum wage increases because anyone earning minimum wage get’s a bump and it comes straight out of profits.

The problem is that minimum wage isn’t inflation adjusted. With every passing year, the minimum wage actually falls in terms of purchasing power. $7.25 in 2009 has the same purchasing power as $7.76 today. Go back farther and it’s even worse, that’s the painful magic of inflation.

What do you feel about minimum wage? Should it get increased or is it fine where it is? Or should it not even exist in the first place? Shouldn’t we let the markets determine what is a fair wage?

(Canadian! Photo Credit: mag3737 [5])