2017-2018 Essay Contest Topic Primer

The minimum wage

While unemployment is low for many sectors of the economy, low wages remain a concern for millions of workers. The minimum wage is the lowest rate, by law, that employers may pay their workers. The current federal minimum wage of $7.25 was established in 2009 and has been unchanged since. Because state legislatures can set minimum wages higher than the federal minimum, there are vast differences in the minimum wage across the United States.

Recently, local governments have begun to legislate their own minimum wage rate within city borders. In recent years, bold action has been taken to raise wages for workers in some cities.  Seattle and San Francisco were the catalysts in phasing in a $15 minimum wage, and other cities are following in their footsteps. This past July, the Minneapolis City Council passed a $15 minimum wage, phased in with gradual increases over the next seven years. The list of cities proposing to do the same is growing.

For this reason, the Federal Reserve Bank of Minneapolis for its 30th annual essay contest asks students the question: Should the federal government increase the minimum wage to $15 per hour?

Good intentions

Those fighting to increase the minimum wage advocate for struggling workers. Many people working low-wage jobs live paycheck to paycheck, especially families living on one income. Supporters argue that a $15 minimum wage would ease this financial stress. The increased sense of financial security, it is hoped, would create happier and more productive workers, and the increased spending power of those workers would benefit the economy.

Tradeoffs

The potential downside of a minimum wage policy is well known: setting a floor on wages can lead to unemployment. In response to an increase in the minimum wage, employers may eliminate positions or cut the hours of the very employees higher wages are intended to assist. Employers may also choose to raise their prices, or go out of business entirely. Just how large these effects are is a matter of some debate.

Like other economic decisions, minimum wage policy involves tradeoffs—giving up something to get something else. A good essay will focus on whether these tradeoffs are worth it. In making an argument, students should examine the evidence on both the benefits and costs of a higher minimum wage, including any benefits or costs not mentioned above.

Exceptions

There are several current exceptions in who is paid the minimum wage. For example, in many states tipped workers may be paid less than the minimum wage if what they receive in tips added to their base rate equals the federal minimum wage. Others groups for whom exceptions apply include workers with disabilities, full-time students, youth under the age of 20, and prisoners. Should these exceptions continue to apply? Or should the $15 minimum wage apply to these workers?

A wealth of possibilities

This primer is far from the last word on the subject, but rather a spring board for students who want to write a good essay. Many resources are available to draw upon, and essays can take many different approaches. The judges will reward creative thinking in addition to careful research, persuasive writing and solid economic analysis. Good luck!

If you have any questions, email EssayContest@mpls.frb.org or call 612-204-5168.