FAQ

Video courtesy of TRYING TO GET BY: [Not] Making Ends Meet In Our Low-Wage Economy, Duke University, and Monuts Donuts

If the minimum wage were raised, how will small businesses cope with increased labor costs?

Higher wages benefit local economies and the businesses operating within them. For example, recent studies have indicated that raising the minimum wage to just $10 an hour would increase paychecks for North Carolina’s workers by $2 billion a year. That’s $2 billion in increased consumer spending at local businesses, boosting business sales, business profits, and creating more than 5,000 new jobs. Workers receiving higher wages tend to spend more, thus stimulating local economic growth. Furthermore, higher wages may attract better-qualified and more motivated employees.

This, in turn, increases employee retention, allowing businesses to save money on hiring costs. Turnover requires managers’ time to review applications, interview applicants, and provide on-the-job training and supervision for new workers once they are hired. Higher wages persuade workers to stay on the job longer. Higher wages also lead to an increase in morale and productivity among employees. This allows businesses to absorb some of the increased labor costs through improved efficiency and productivity.

Read the full report from the North Carolina Justice Center here.

Read new research on high minimum wages and job growth.

Will raising the minimum wage lead to higher prices and inflation?

The overall impact of raising the minimum wage on the price of goods and services is modest. Lifting low-wage workers out of poverty outweighs the potential inflationary effect of raising wages.

Will raising the minimum wage lead to job losses or increased automation?

Studies have shown mixed evidence regarding the relationship between minimum wage increases and job losses. Some research suggests that small wage increases have a minimal impact on employment. In some cases, employment levels have increased following a wage increase. Where businesses do feel the need to reduce labor costs, 25 years’ worth of studies by labor economists have shown that businesses don’t respond by laying off workers, they respond by reducing workers’ hours—for example, a 10-percent increase in the minimum wage can reduce employee hours by about 1 or 2 percent. But low-wage workers still come out ahead—even after seeing their hours go down, they see a net increase in wages of 8 to 9 percent.

The fear of widespread job losses due to automation is often overstated. Automation is typically driven by technological advancement. Higher wages can incentivize investments in technology that complement human labor rather than replace it.

How will a uniform minimum wage affect regions with lower living costs?

A uniform federal minimum wage provides a baseline to address income inequality and lift workers out of poverty nationwide. States and localities with higher cost of living should have the ability to set higher minimum wages based on their unique economic conditions.

 
 

Want more information?

Let us know what you need and we can point you in the right direction.