The impact of $15 minimum wage on rural small businesses has become a major topic of debate in economic and labor policy circles. Originally established during the New Deal era, the federal minimum wage (FMW) was created to ensure a basic income floor for American workers. It was enacted in 1938 under the Fair Labor Standards Act (FLSA), which also prevented minors from entering the workforce too early, established a 44-hour workweek, and set a federal wage floor. Over the years, the FLSA has been amended several times to broaden its coverage and include new worker classifications.
This article explores the impact of $15 minimum wage on rural small businesses, analyzing its implications on job competition, unemployment, and crime rates in rural areas.
Increased Job Competition in Rural Areas
One of the most immediate outcomes of raising the minimum wage to $15 in rural areas is increased competition for low-wage jobs. According to basic economic principles of supply and demand, increasing the FMW leads to an upward shift in the labor supply curve. More individuals become willing to work when wages are higher.
Additionally, higher minimum wages in rural areas could attract more qualified workers – individuals with greater human capital – who might previously have ignored rural opportunities. This wage increase could make rural jobs more appealing than urban positions still capped at $7.25.
By making rural employment more financially rewarding, a $15 minimum wage could shift labor dynamics, drawing in workers from both within and outside rural communities (Collins 130).
Unemployment and Cost Pressures for Rural Small Businesses
While job competition may increase, the impact of $15 minimum wage on rural small businesses could also include higher unemployment rates, especially among low-skilled workers.
Rural industries often rely heavily on affordable labor. A wage hike would raise operational costs, forcing many businesses to make difficult choices. These firms might reduce their workforce or cut back on hiring to maintain profitability.
While the wage increase affects all workers, businesses might opt to retain highly-skilled employees – who are fewer in number – while letting go of more low-skilled workers. This would lead to a decline in demand for unskilled labor, contributing to rural unemployment (Collins 132).
Crime Rate Impacts: A Double-Edged Sword
The relationship between wage increases and crime rates is complex. Raising the FMW to $15 in rural areas could have both positive and negative impacts on crime.
On the positive side, higher wages could reduce property crime. Individuals – particularly those reentering society after incarceration – would have access to better-paying jobs, decreasing the incentive to engage in illegal activities.
Conversely, increased wages may force businesses to relocate or reduce employee hours, creating more idle time for workers and potentially driving up crime. Reduced opportunities may also lead some individuals to turn to alternative, and sometimes illegal, sources of income (Fone 2).
Summary: The Mixed Outcomes of a $15 Minimum Wage in Rural America
To conclude, the impact of a $15 minimum wage on rural small businesses includes a mix of benefits and challenges:
- Increased job competition, with more skilled workers seeking rural employment.
- Higher unemployment rates among low-skilled laborers due to rising business costs.
- Mixed effects on crime, depending on the resulting employment dynamics and business responses.
While the $15 minimum wage proposal aims to uplift low-income workers, its broader consequences – particularly in rural contexts, require careful analysis and tailored policy responses.
Works Cited
- Collins, Christopher. “Raising the Minimum Wage: An Economic Gain.” The Park Place Economist 25.1 (2017): 20. Link
- Fone, Zachary S., et al. “The Unintended Effects of Minimum Wage Increases On Crime.” Journal of Public Economics, vol. 219, Mar. 2023, pp. 1-28. https://doi.org/10.1016/j.jpubeco.2022.104780
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