By Abrah
am Mendelson ‘17During last week’s midterm elections, a swell of support for progressive ballot measures counterbalanced the success of conservative candidates vying for House and Senate seats. Among the most notable referenda were several states’ proposals for raising the minimum wage which, since 2009, has been set at a federal minimum of $7.25 an hour. In four states–Alaska, Arkansas, Nebraska, and South Dakota–ballot measures to increase the minimum wage passed with overwhelming support; South Dakota and Arkansas raised the wage floor to $8.50, Nebraska to $9, and Alaska to $9.50. These referenda are only the most recent successes in a minimum wage movement that has made strides over the past year.In early 2014, President Obama first proposed a federal minimum wage increase to $10.10 and, while Congress has since failed to pass such a policy, that mandate has anchored the country’s thinking toward a higher minimum wage. Throughout 2014, ten states enacted increases in the minimum wage, even those among the now-29 states that already have the minimum wage set above the current federal floor of $7.25. In fact, some states have passed legislation that will increase the minimum wage to meet Obama’s $10.10 standard in the coming years.As with anything else related to politics, fact-based argument and rhetoric have been advanced on both sides of the issue. The non-partisan Congressional Budget Office estimates that a federal increase in minimum wage to $10.10 would have dual effects of increasing the pay of 16.5 million low-wage workers, which is more than 11% of the labor force. Unfortunately, this pay gain for many is expected to leave 500,000 low-wage workers unemployed as increased payroll expense weighs down profits for small and large businesses. While the wage increases from last week’s referenda were not as far-reaching as those in the Congressional Budget Office’s study, the effects are the same at a lesser magnitude.Another crucial consequence of the wage debate is how it affects price inflation. An employment report last week further supported the argument that stagnant wage growth has suppressed price increases in the wake of large employment gains. While it is good that inflation is kept in check, the Fed has missed its inflation targets over the past two and a half years, and stagnant wages have been a contributing factor. Unlike other factors that suppress inflation, such as the recent slide in oil prices, stagnant wage growth has been an underlying problem consistently every period the Fed has missed its target. Increasing the minimum wage 39% at the federal level will not wholly solve stagnant wage growth, nor will inflation reach the Fed’s preferred levels as an immediate result. However, it certainly will alleviate some of the downward pressure on prices; at the moment, this is especially crucial, since the dollar is reaching highs that have not been seen since 2010, hindering growth of American exports.Raising the minimum wage has crucial impacts on multiple levels of the economy. As the U.S. begins its home stretch along the path to economic resilience, it is important to increase income of low-wage workers and raise inflation to optimal target levels so that the entire economy can benefit. Voters last week mostly identified with the first objective, but the latter is just as much, if not a better reason, for casting a ballot in favor of a higher minimum wage. The minimum wage movement has and will likely continue to make gains on the state level in reaching the $10.10 target President Obama has set. Hopefully, the voters’ mandate from the 2014 referenda will motivate Congress to expedite the process on a federal level.Sources:http://www.bloomberg.com/news/2014-11-10/who-s-afraid-of-fed-raising-rates-not-these-u-s-bond-investors.htmlhttp://www.bloomberg.com/politics/articles/2014-10-31/weak-wages-stir-voter-ire-at-obama-amid-gridlockhttp://www.nytimes.com/2014/11/05/us/politics/higher-minimum-wages-prove-popular-in-fla-marijuana-is-less-so.html?_r=0http://www.nytimes.com/2014/11/05/upshot/election-results-2014-minimum-wage.html?abt=0002&abg=1http://www.washingtonpost.com/opinions/katrina-vanden-heuvel-the-midterm-minimum-wage-mandate/2014/11/03/3e397a96-62ed-11e4-836c-83bc4f26eb67_story.html