President Obama’s plans to increase minimum wage were originally met with significant opposition. People feared raising it would lead to higher prices and higher unemployment. Initially, raising minimum wage would lead to increases in unemployment although most economists believe the increase would not be that significant. In the long run increasing minimum wage could help decrease unemployment and increase the wages of low income workers.
On a recent blog post on the Economic Policy Institute Blog, it mentions the recent BLS report on college enrollment and how college enrollment of students who just graduated high school has actually been dropping since 2009. This likely has to do with significant losses in the Great Recession meaning less families can afford to send their kids to college. Parents who are either unemployed or making low incomes cannot support their children through college and a recent high school graduate does not have the financial resources to pay for their college education alone. This could be detrimental to the economy if it continues. These high school graduates would be missing out on learning skills necessary to get a good job. If they are unable to find good jobs, they will be low income workers just like their parents, continuing a cycle that seems hard to break. One solution is helping educate these students in order for them to be able to get better jobs and move up the socioeconomic ladder.
On the FRED Blog, there was a graph posted of the unemployment rates of different levels of education. For those who graduated from college with a Bachelor’s degree or higher have significantly lower and steadier unemployment. During the recession the highest the unemployment rate of that level education ever got was slightly above 5%. On the other hand, for high school graduates with no college education, the unemployment rate was over double that. The unemployment rate for college graduates is much less volatile. Any spikes on the graph are much less significant than those for the lower levels of education.
Raising minimum wage would help educate the lowest class of people. Ultimately it will help those on the on the lower end of the income scale and will help them afford to go to college, allowing them to move up the socioeconomic ladder. In the long run this is good for the economy as it will decrease the number of low income workers and could lead to more equality in the economy. So while it may have some negative consequences in the short run, raising minimum wage would be beneficial for the economy in the long run.