March Beginners' Tournament: The USFG should significantly raise the federal minimum wage
USFG - short for United States Federal Government
minimum wage - the lowest wage permitted by law
raise - increase the amount, level, or strength of
Significantly - to at least $10 an hour
Round 1: Acceptance
Round 2: Arguments
Round 3: Con rebuts Pro's arguments in Round 2 and vice versa
Round 4: Both sides defend their original arguments in Round 2
Look forward to a great debate!
Argument 1: Raising the minimum wage would increase unemployment
One of the greatest shortcomings of raising the minimum wages is that wage increases are often correlated with the decrease of such low-paying jobs hurting those who are supposed to be help with this wage increase. The extra money for these workers has to come from somewhere and such comes primarily from the businesses that employ them. In a 2014 study by the bipartisan Congressional Budget Office calculated that a half-million jobs would be lost if the minimum wage was increased to at least $10 an hour as this debate describes. 
If you also look at the history of minimum wage, wage hikes do reduce employment. With the very first introduction of the minimum wage at $0.25, according to the US Department of Labor, the minimum wage led to 30,000 to 50,000 jobs lost which accounted for around 10-13% of workers who had jobs before the minimum wage. With the implementation in Puerto Rico, 120,000 jobs were lost within the year after the law was put into place. A review of the Minimum Wage Study Commission’s report in 1981 shows that a recent 10% increase in the federal minimum wage resulted in the reduction of teen employment by 1-3%. 
With the added labor costs, businesses would have to raise their prices, cut employee hours and benefits, cut workers, or in the 21st century replace them with computers, machines and robots. Take for example BAXTER, a robot that costs less than the average worker’s salary at $25,000 capable of doing many unskilled jobs using pennies worth of electricity to operate . Sure, it may not be as versatile as your average minimum wage worker, but if you look at computers, they developed from a programmer’s play thing in the 60’s to literally integrated into everything in society within a matter of decades. The Bank of England predicted that within the next 10 to 20 years, robots will take over 80 million jobs in the United States leaving those who are only capable of simple tasks out of the job market. By raising the federal minimum wage, you are only pushing employers to utilize more robots and computers in response to their raised labor costs. 
Argument 2: Raising the minimum wage is ineffective at decreasing poverty.
According to the Census Bureau, 34% of those living in poverty do not work. And if they don’t work, such individuals would not benefit from a minimum wage increase. And pertaining to my previous argument, if the minimum wage was increased, there will be less jobs inflating the percentage of people who will not benefit from a wage hike. 
Another issue with raising the federal minimum wage is the fact that cost of living varies by state. The states where the cost of living is lower would be negatively affected by unnecessarily raising costs of businesses in areas where poverty is minimal. This map below illustrates areas where costs of living are high and low. 
In addition, most minimum wage earners don’t even live in poverty. The average family income of a minimum wage earner is around $53,000. 
I have proven that not only would increasing the federal minimum wage to $10 or above would be ineffective in reducing poverty, it would hurt businesses and ultimately the minimum wage workers through unemployment.
The actual purchasing power of workers' wages has been stagnating (and in some cases, even decreasing) due to the effects of inflation. The de-facto loss in wages' purchasing power can be confirmed through the Bureau of Labour Statistics' website .
An analysis by the Pew Research Center found that the actual purchasing value of the current minimum wage is much lower than that of the minimum wage in 1968.
In order for the minimum wage to have the same purchasing power today as it did in 1930, it would have to be raised to at least $10.20 per hour .
Point II: Economic stimulation
A minimum wage hike would give workers more money to spend. Due its disproportionate effects on lower-wage workers, nearly all of the new money would be guaranteed to be spent. Data has confirmed that a higher minimum wage would boost consumer spending, which would in turn increase demand and stimulate economic growth:
In 2011, the Chicago Federal Reserve Bank examined 23 years of household spending data and found that every dollar added to the minimum wage resulted in $2,800 increase in individual consumer spending.
Additionally, the Economic Policy Institute found that increasing the minimum wage from $7.25 to $10.10 dollars per hour "would result in a net increase in economic activity of approximately $32.6 billion over the phase-in period and would generate approximately 140,000 new jobs."
Point III: Good for native workers
It is well established that a higher minimum wage leads to a decrease in low-skill immigrants. In fact, this is very likely why Switzerland debated raising its minimum wage to $25.
Some may argue that (at least, legal) immigration is beneficial to the US economy, citing popular economic opinion. However, more in-depth analysis has revealed fundamental flaws in economic studies which found no negative economic impact from increased immigration:
"If you assume that all low-education workers are potential substitutes for each other—the 23-year-old recent arrival from Guatemala with the 53-year-old who proceeded from high school to the Army—then your model will show a less dramatic effect of immigration on wages. If, however, you assume that the 23-year-old Guatemalan is competing with 20- and 30-something native-born workers who lack diplomas, then your model will show a very big effect."
"A model based on unrealistic assumptions can still achieve perfect internal consistency. It just won’t describe the real world very accurately. Which seems to be precisely what is happening with immigration economics."
The negative impact immigration has had on the prospects of native workers can be confirmed by looking at government employment data:
"In March 2015 the working age population had grown by nearly 15 million to 204,026,416, which is in line with the 10.6 million new immigrant workers, but population grew to nearly 320 million and the EPR fell to 59.3.That works out to 120,987,665 jobs, which is a mere 24,367,681 fewer jobs than the NBER model predicted. From 2000 to 2015, 16.4 million new immigrants have created a grand total of 5,832,319 new jobs, which means that either a) over 10 million native Americans have lost their jobs to immigrant labor or b) over two-thirds of the new immigrants are collecting welfare. Either way, these 16.4 million immigrants have not been a boost to the economy."
Native workers would not only see their wages rise, but would have a much easier time finding work. This would particularly beneit low-skill workers.
Amidst concerns of intervention in the functioning of the free market, it must be kept in mind that it would be absolutely ridiculous for a pseudo-democratic government to act against the best interests of its people. If a government will not protect its people, what exactly is it good for?
I have demonstrated that raising the minimum wage would correspond with inflation, help low-earning workers, provide economic stimulation, and increase the purchasing power of actual wages. Additionally, the case for a minimum wage can be extended beyond the purely economic, as it functions as de-facto immigration control.
Point 1: (The argument with no name)
The main problem with this argument is that minimum wage plays a contributing factor to inflation. If you increase the minimum wage to the level proposed, it would only increase inflation, quickly and effectivly downplay the acutal purchasing value of the minimum wage. I elaborate this point more in my Point 2 rebuttal.
Point 2: Economic Stimulation
With the proposal to increase the minimum wage, businesses will have to shift to account for the increased labor costs. According to a paper by Péter Harasztosi and Attila Lindner, that cost primarily is pushed on to the consumer in the form of higher prices . There is empirical evidence that such costs are pushed on to the consumer. Restaurant prices have been found to have positive correlation to the minimum wage in a paper by two senior researchers at the Federal Reserve Bank of Chicago and a senior researcher at the Economic Research Service . In another study that looked at the effects of a minimum wage increase from $4.25 to $5.15 in California found that,
"The federal increase from $4.25 to $5.15 costs California families an average of $133 more per year for the goods they normally purchase. Since higher-income families spend more, they would pay more in absolute terms than lower-income families: up to $234 per year compared to $84 per year." 
The new found money that minimum wage workers will receive, shrinks as a result of the inflation that accompanies minimum wage increases.
Even though people spend more with wage hikes, the effects are not as clear cut. Aaronson and Eric French of the Chicago Federal Reserve Bank discovered that the money that was spent in response to a one dollar wage hike was often borrowed as such workers took on more debt . Having households in America accumulate debt is not good for the economy because as debt grows, families have to spend less or risk default which wouldn’t be good for the economy . Harvard University economists Carmen Reinhart and Ken Rogoff came to the conclusion that rising household debts are the precedent to economic crisis. Another team consisting of economists Atif Mian and Emil Verner of Princeton University and Amir Sufi of the University of Chicago points to household debt as a source of instability and lower economic growth. They also connected such household debt to the 2008 economic recession.
As stated, in my previous argument, there will be many people who would be unable to spend their raised wages because they are out of a job. With the calculated job losses associated with the new minimum wage, the GDP is calculated to be decreased by 47 billion dollars. 
Point 3: Good for native workers
I’m not necessarily sure what point Pro is trying to make here. As the point I have made in my previous argument, raising the minimum wage would cause unemployment. It seems that Pro indirectly concedes this point, instead the unemployment would instead be shifted to the immigrants. Statistically, immigrants make up more of the poverty population than natives .
Minimum wage is supposed to help alleviate poverty and what Pro advocates is that we make income inequality even worse by discriminating against poor immigrants even the 6.6 million that became naturalized over the last decade . Shouldn’t we also look out for these people too?
 "Increasing the Minimum Wage" Public Policy Institute of California, May 2000.
Argument 1: Increases to unemployment
Con states that raising the minimum wage would lead to job loss, arguing that businesses will have to respond to new costs posed by higher wages with cutting jobs. A reasonable concern, and seemingly valid as well. However, it falls apart on several levels upon further examination:
- To begin with, there are multiple ways in which raising the minimum wage alows for business to save money. A study on the Harvard Business Review by MIT Professor Zeynep Ton  found that higher wages boost productivity and decrease employee turnover rate. Another study found a reduction in employee turnover rate within nine months of a state-wide minimum wage hike .
- Additionally - as a National Employment Law Project analysis  on Census Bureau data found - most low wage employees work for large companies, which can certainly afford the costs of higher wages.
Con supports his argument with a report from the Congressional Budget Office, which found that raising the minimum wage would lead to some unemployment. What he neglected to mention, was that the very same report found that a minimum wage hike would result in massive econmic benefits, which outweigh potential costs. The projected effect on employment was essentially insignificant: a mere 0.3% reduction .
I did say "projected" for a reason; the CBO's estimates on the unemployment increase shouldn't be taken to be conclusive. Economist Michael Reich wrote an analysis at ThinkProgress, noting that:
"The method used by the CBO to estimate job loss is never clearly explained. According to the Appendix, the figure appears to come almost entirely from its “synthesis” of the research literature — which it concludes implies an elasticity of teen employment of -0.075 percent. This estimate is a bit below the low end of estimates in papers by Neumark and Wascher or Sabia and Burkhauser, but higher than those in various papers by Dube, Reich, and others. No details are provided concerning how the CBO arrived at this number, except that it discounts some older studies slightly because of publication bias."
"Some of the studies that the CBO relied on are also problematic. As is explained in detail in a 2013 paper by Allegretto et. al that the CBO cites, the Neumark and Wascher paper and other studies that find negative employment effects suffer from methodological flaws that bias their estimates."
Additionally, Con claims historical wage hikes have increased unemployment. He argues that with the introduction of the minimum went several thousand jobs, which is true. However, it suffices to say, comparing the introduction of the minimum wage to an increment makes for a false analogy. Particularly when empirical data does not support his conclusions.
He later attributes job losses in Puerto Rico to the minimum wage hike implimented shortly prior. However, this is a misattrubation of the cause. As an analysis demonstrated, much of Puerto Rico's job losses had absolutely nothing to do with the minimum wage increment .
Ultimatly, Con's case falls apart at an empirical level. Multiple studies have found minimal to no negative impact on employment prospects as a result of minimum wage hikes:
- A 2013 report which analyzed the past 2 decades on minimum wage research found that minimum wage increases had next to no negative effects on employment .
- A 2011 study found that raising the minimum wage did nothing to reduce employment rates, and boosted average income levels. Additionally, it reviewed and criticized past bodies of research that attributed increases unemployment to a higher minimum wage 
- A 2010 study compared employment levels accross neighboring counties with differing minimal wages from 1990 to 2006, and found that higher minimum wages had no negative effects on employment. 
Argument 2: Ineffective at decreasing poverty
Con argues that, since a minority of living poverty are unemployed, they will not benefit from a minimum wage hike, which is true. However, in addition to repeating the unemployment argument (which was addressed above), he states that the minimum wage will be ineffective at combating poverty.
Nonetheless, multiple studies show that raising the minimum wage does, in fact, do exactly that.
For just one example, the very CBO report which Con cited in his first argument found that an increment to $10.10 would directly benefit over 16 million families . Additionally, these benefits would raise millions from below the poverty line. Even if we use the report's likely flawed estimate for unemployment, can it really be said that half a million recuperable jobs are more valuable than the livelihoods of several million people?
Other studies and analyses have documented the counter-poverty effects of raising the minimum wage .
Raising the minimum wage would not result in significant job losses (if any at all), and it would be effective at decreasing poverty. Even assuming that minimum wage hikes would kill jobs, Con would have to demonstrate that the costs would offset the benefits for his case to stand.
Defending my unemployment argument:
One problem with Con’s argument that worker productivity will rise if minimum wage rises is that the two don’t have any correlation. Take for example the time period of 2000-2007 with worker productivity. Over that time period, worker productivity went up by 2.6% in the nonfarm business sector and 4.7% in the manufacturing sector yet during that time the minimum wage stayed at $5.15. Also notice that the time period saw some of the highest growth compared to other time periods. Now look at the 2007-2015 era and you will notice that productivity growth was half of what it was in the period before despite the fact that minimum wage rose by more than $2.00 during that time.  
If worker productivity and minimum wage really were correlated then you would expect to see the 2000-2007 era to have less growth than its 2007-2015 counterpart as the real value of the minimum wage shrunk due to inflation over that period and vice versa.
On to the issue of employee turnover. Let me first point out that employee turnover isn’t necessarily a bad thing. Employee turnover is good for the company and the economy if:
This brings me to the point of price-out theory. By artificially increasing the value of the job, the employer would look for employees worth more than the job who are often skilled workers that are often not in poverty. Take for example at McDonalds, if you have an applicant who is a college student in an engineering major who can fix machinery versus a high-school dropout in poverty, the employer is now less inclined to give the job to the high-school dropout. It would be such scenarios such as these that increasing minimum wage wouldn’t help those in poverty ultimately defeating the purpose of it.
Large corporations can also easily afford to replace minimum-wage workers with automated machines.
With the CBO report, while 500,000 jobs makeup 0.3% of total jobs in the United States , take into account that there are 1.3 million jobs in the US that pay at the US federal wage . Since this is minimum wage, it is safe to assume that most of the job loss will be at minimum wage jobs. That is around 38% of total minimum wage jobs in the United States. If their estimates line up with other researched papers that state their methodologies, there isn’t too much need for concern as you still have those papers to fall back on. If the report is an outlier, then there would be a much greater need for concern.
You criticize the methodology of the the papers in which the study derives its numbers from but never go into detail what his argument is or why we should accept his critique.
You attack my claim of historical wage hikes for making a false analogy between introduction and increase of the minimum wage. Yet you could also look at it as an increase from $0 to $0.25. Also even before the implementation of the minimum wage, there was still a sort of “de facto” minimum wage which is what the job is worth. Since the abolition of slavery after the Civil War, employers are required to pay their workers something, otherwise why would someone take a job.
If you look closer at my figure for Puerto Rico, that study was talking about unemployment during 1938 . The study you brought up covered unemployment in Puerto Rico since the year 2000. Case closed
“Multiple studies have found minimal to no negative impact on employment prospects as a result of minimum wage hikes”
Yet a study by economists David Neumark and William Wascher found that most studies came to the conclusion that raising the minimum wage would have a negative effect on employment.
Also note that Pro hasn’t disputed my arguments about mechanization taking over the minimum wage workers.
Defending Argument 2:
First off, Pro blatantly misrepresents the CBO report. It is not 16 million families but rather workers. He also misrepresents the number of people who would predictably rise from the poverty line. Instead of millions as Pro suggests, the figure comes at around 900,000 directly from the report .
Also from the CBO report is that average annual family incomes would only increase by a measly 3% from this increase. This just proves my point that raising minimum wage is a ineffective way to help those in poverty.
Point 1: Inflation
Con argues that a higher minimum wage contributes to inflation. However, Con significantly overstates the supposed problems that inflation poses for the economy.
It can be conclusively demonstrated that a reasonable minimum wage hike will not lead to the outlandish hyperinflation Con's argument implies. It won't necessarily lead to any inflation to begin with. Refer to the previously-displayed graph of increases to the minimum wage, from 1938 to 2012:
And compare with the rate of inflation over the same time period. If minimum wage hikes had an effect on inflation, we would see see a general correlation. But we don't. There is no accordance to begin with - let alone anything as drastic and dangerous as Con stated.
For one example: The large increment to the minimum wage, which took place around 2008, directly contradicts the notion that it will somehow lead to more inflation. That is what we would expect were Con to be right, but as an analysis of the graphs demonstrates, no such thing took place.
Point 2: Economic Stimulation
Con then argues that the costs from a higher minimum wage would be pushed unto the consumer. This is somewhat true, but not in the absolute.
While some costs may be pushed onto the consumer (as his sources show), that cannot account for the entirety of the new income generated by a minimum wage. That an inflation-adjusted minimum wage can be raised to begin with disproves Con's argument.
Point 3: Good for native workers
Con appears to have misunderstood my point: A higher minium wage would discourage immigration from the get-go. It can only be argued to harm legal immigrants's employment if we assume it has a significant impact on employment to begin with (which is contestable, refer to the third round) - either way, this would only prove my third point.
I would like to thank my opponent for a great debate to start off the Beginner's tournament. Vote Pro!