The Bare Minimum
Obama's proposal to up minimum wage could impact MSU students
Noah Matchett’s day begins at 8 a.m. before many students take their first bite of cereal.
The agricultural industries sophomore spends his day balancing school and the physically demanding task of feeding 400 sheep each day at the MSU Sheep Teaching and Research Center, 3885 Hagadorn Road, in Okemos.
Matchett’s work is manual — no machines, no shortcuts — and continues into the night. He lives in the center and rises periodically to check on the sheep.
Sometimes, Matchett’s not sure it’s all worth $7.40 an hour — Michigan’s minimum wage rate and higher than the federally-mandated $7.25 an hour.
“It’s worth more than that in the private industry,” he said. “That is fair for some jobs and too little for others.”
During his State of the Union address two weeks ago, President Barack Obama proposed raising the federal minimum wage and requiring all employers to pay workers at least $9 an hour.
According to the U.S. Bureau of Labor Statistics, about 4.4 million Americans earn minimum wage at about $15,080 per year, and more than half of them are under the age of 25 — the age range of many MSU students.
“It could mean the difference between groceries or the food bank, rent or eviction, scraping by or finally getting ahead,” Obama said of the wage increase.
Students, experts and businesses now are facing the possible consequences of the possible increase, both good and bad.
Who gets the benefits
Obama proposed increasing the minimum wage to help balance national income inequality. However, some experts argue who the increase actually will impact.
About 22 percent of the total workforce will be affected by the proposed wage increase. That includes about 12 percent of the workforce under 20 years old, such as underclassmen students at MSU, and about 88 percent of workers 20 and older, such as upperclassman and graduate students, according to the Economic Policy Institute.
Although Obama proposed the increase to help low-income families, economics professor Charles Ballard said those aren’t the people the increase will affect.
“Some of the people who get the minimum wage are teenagers with affluent parents,” he said. “If the minimum wage goes up and those affluent teenagers keep their jobs, it does not do anything to reduce poverty.”
Some students use minimum wage jobs throughout East Lansing to pay MSU’s average $12,700 tuition for in-state undergraduates. While tuition today is about 14 times higher than in 1980, minimum wage is less than 2.5 times higher.
However, economics professor Stephen Woodbury said the increase is more likely to affect an MSU student’s younger brother or sister.
“It has less of an effect on people once they hit age 20 because they’re higher productivity and are making more than minimum wage anyway,” he said.
Employer vs. employee
According to a Pew Research Center poll, 71 percent of Americans support raising the minimum wage, but the debate for and against the increase is more complex than that.
Matchett said most students working for minimum wage probably would support the pay increase.
The wage increase could lead to layoffs from employers unsatisfied with the quality of work they are getting for their money.
Ballard said employees who are working for the current minimum wage possess the skills to produce about $7.40 worth of work, but employers could decide paying these same workers $9 isn’t worth the work they are producing and start implementing layoffs.
Employers should pay students for what they can contribute to the company, and some haven’t had enough experience to merit $9 an hour yet, Matchett said.
“Some students are worth minimum wage — not because they’re poor at things, just because they haven’t had the experience in the field,” he said. “Some students have had quite a bit of experience and have the skills that worth a little bit more.”
Mike Wiley, assistant manager of the Student Book Store, 421 E. Grand River Ave., said his workers start at minimum wage.
Although he is unsure how the minimum wage increase would affect the book store, he said increasing the minimum wage incrementally year to year, rather than the dramatic jump from $7.40 to $9 an hour, would decide how many students the store hires.
An uncertain job market
The task of finding employment in an uncertain job market often looms in the back of students’ minds as they work toward earning a degree.
The question is whether a minimum wage increase would negatively impact the job market and availability of jobs, and Ballard said economists can’t seem to agree on the answer.
MSU’s annual Recruiting Trends show a 5 percent increase in hiring graduates with bachelor’s degrees. Computer science, business, English and advertising majors are seeing increases in employment, but engineering and accounting majors are suffering, according to the report.
He said based on his interpretation, studies show the increase for those who keep their jobs will be more than the job losses.
“On the whole, the low-wage group would have increased earnings,” he said. “But as I (said), that overall increase in earnings is the result of higher wages for some and lost jobs for others.”
Woodbury said studies have been done to examine whether raising the minimum wage would have a stimulating effect on the economy, based on the assumption workers earning more money will have more money to spend.
From his understanding, studies show the wage increase doesn’t prove to have that effect, and if anything, it could lead to lost jobs and cut hours.
He said the weak state of the nation’s labor market isn’t the most ideal environment for the increase.
“I can’t imagine a worse time to raise the minimum wage,” Woodbury said. “It’s certainly not going to create jobs.”
However, according to a Center for Economic Policy Research study, research concludes the minimum wage has little effect on overall employment because the impact of wage increases is small in comparison to most business’ overall costs.
The study explains employers might compensate by reducing hours, cutting training and reducing pay for highly paid workers, but still hiring the same amount of people.
Long story short, Congress hasn’t decided whether to take action on the minimum wage increase and experts aren’t certain whether an increase will mean more money in the workplace or less jobs for students.
For now, Noah still will tend to his sheep at the current minimum wage.