Could Higher Minimum Wages Actually Help Businesses?

A new minimum wage hike for federal contract workers raises new debate about the impact of higher minimum wages. Learn more about both sides of the issue.

Feb 2, 2014 at 3:11PM

Last week, President Obama issued an executive order raising the minimum wage for federal contract workers to $10.10 per hour. With McDonald's (NYSE:MCD), Wal-Mart (NYSE:WMT), and many other employers facing controversy over minimum-wage workers, many economists worried about the adverse impact a higher minimum wage could have on employment. But at least some economists think that higher minimum wages could actually help businesses.

In the following video, Dan Caplinger, The Motley Fool's director of investment planning, goes through the arguments on both sides. Dan notes that many economists believe that higher wages force businesses to cut back on hiring. But he also goes through a study from the Center for Economic and Policy Research, detailing some other moves that businesses might make that could lead to less of a negative impact. The study looks at employers cutting labor costs elsewhere, as well as the potential productivity gains from lower turnover and workers actually working harder. Dan concludes that raising minimum wages for federal contract workers under contracts given to United Technologies (NYSE:UTX), Raytheon (NYSE:RTN), and other major contractors could give valuable data on the actual impact of rising minimum wages.

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Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends McDonald's and owns shares of McDonald's and Raytheon. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

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This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

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KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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