In President Obama’s 2013 State of the Union address, he called for an increase in the national minimum wage. The President called for a $1.75 increase in the minimum wage over the next couple of years, in addition to indexing the minimum wage to inflation. The general reasoning behind increasing the minimum wage is to help low-skilled parents of children earn a wage that can support their family.
The federal minimum wage was last increased from $5.85 on July 24, 2007. The minimum wage increased to $6.55 after one year, and finally rose to its current level $7.25 after two years. The increase in the minimum wage represented a 24% increase in the hourly wage for the lowest skilled laborers. Typically, economists assume that a full-time employee works about 2000 hours per year (40 hours a week, for 50 weeks). At full time, the minimum wage annual salary rose from $11,700 per year to $14,500 in just over two years. An increase in the minimum wage to $9.00 per hour would increase the annual salary by another 24% to approximately $18,000 per year. Assuming this increase were fully phased in by 2015, the minimum wage would have been increasing at approximately 5.5% per year in nominal terms. Linking the minimum wage to inflation would likely lead to additional increases of 2-3% per year assuming inflation remains at historic levels.
Notably, a wage of $18,000 per year is still below the poverty level for a family of three. Often, this prototypical family of a single working adult with two children is touted as the main target of a minimum wage increase. People tend to support minimum wage increases, because they sound like the right thing to do, but are they good policy? Labor economists surveyed by the Employment Policies Institute believe that the minimum wage is an inefficient tool at alleviating poverty, while the Earned Income Tax Credit is seen as a much more efficient tool. The goal of increasing the minimum wage is often said to be a poverty fighting tool. The Economic Policy Institute (video) supports the increase in the minimum wage for the reasons that they believe raising the floor would reduce poverty and bring it back to historic levels. The Economist recently discussed the President’s proposal, including the fact that many economists don’t believe raising the minimum wage would have much impact on unemployment.
Beginning in 1994, some cities and municipalities began enacting ordinances dubbed “living wages” that go above and beyond the national and state minimum wages. The living wage is estimated as the amount that it would take a family to meet a minimum “standard of living”. For example, in Harrisonburg City, the living wage is estimated to be about $8.52 per hour for a single adult, but $23.48 for a single adult with two children. In a more high-cost city like Arlington, VA, the comparable wages would be $13.22 and $29.40 per hour. For a single adult with two children, this would be more than $60,000 per year. Debating the basket of goods that falls into a “minimum standard of living” aside, few are suggesting that we set the minimum wage at $60,000 per year.
Questions you might want to answer:
I would like you to think about the government’s role in the economy when it comes to the minimum wage. DO NOT try to answer all of these questions, just focus on one topic. Also, try to think about your comment from different angles. To write a brief comment, read the previous comments, compose your thought in a Word document, and paste it in the comment box below. The more original and factually supported your comment, the better your grade will be. Avoid anecdotal evidence including personal accounts. These emotional stories are often used in place of the general truth. Finally, your comment will appear ONLY AFTER IT IS APPROVED. Please don’t email me asking where it is, it often takes a while for me to get to it.
NOTE: Read other students comments before posting, and please leave your name with your posting.
I would like you to discuss some pros and cons of a minimum wage and/or living wage law in the context of one of the following questions, or one you made up on your own.
- Can you find any examples of an employer paying the statutory minimum wage locally or in your hometown? What types of skills are they seeking?
- What type of jobs are typically associated with minimum wage or near minimum wage pay, and why?
- What incentives are created for employees already working at the minimum wage by raising the statutory wage as outlined above?
- Who typically earns the minimum wage? Is it the family of three with a single working parent and two children?
- Would increasing the minimum wage help a single working parent with two children to raise their family?
- What might employers do if they were faced with minimum wage increases? Do you have any non-anecdotal evidence to support your claim?
- Do employers have any responsibility to pay wages that their employees can live on?
The pros of increasing the minimum wage are clear; more money, less poverty. The ‘omnibus poll’ shows us that a majority of people are in support of an increased minimum wage, and a majority of us earn, or know someone that earns the minimum wage. So in a general sense, it would be easy to support the increase in wages. However, what we’re not looking at is the bigger picture. First of all, the article ‘Op-ed; The $9 minimum wage that already exists,” points out the fact that most minimum wage earners today are already earning $9 an hour, and evidence suggests that an increase in minimum wages has, in the past, had no impact on poverty levels. The same article states that, 60% of people below the poverty line simply aren’t working. What might employers do if they were faced with minimum wage increases? A minimum wage increase certainly does not lead directly to an increase wages. More commonly, as stated in ‘The $9 minimum wage that already exists,’ employers are more likely to lay-off workers due to the high labor costs. In addition, as we talked about in class, and read in the textbook, an increase in minimum wage leads to a surplus of available workers. In a surplus of labor, the ability of firms and businesses to discriminate workers increases.
According to the article “Ten states raise minimum wages in 2013, but impact on low-skilled and teen workers is unknown” by the Daily Caller News Foundation, the last time the minimum wage rose approximately 600,000 teen jobs were lost as a result. The author of the article indicates that what employers do in reaction to the rising minimum wage is they lay off the least skilled and least experienced workers which is primarily teenage workers because they naturally have the least amount of time and experience with work so they are very negatively effected when the minimum wage increases. The article, “Minimum wage hike, maximum job loss”, in The Detroit News on February 15th says that only 10 percent of minimum wage earners are heads of households with children. These families will be in jeopardy of job losses as employers are forced to cut workers in order to stay in business and pay the new minimum wage. The reality is that this increase will not significantly help parents trying to raise families because they are not earning minimum wage, and if they are they could be at risk of losing their jobs because employers may lay off workers due to increased wages.
Because wages paid to employees are a salary expense to employers, the cost of running a business would increase if minimum wage increases. When illustrated on a supply and demand curve, the supply curve will shift left because production cost is now higher. Thus, prices will increase, and the quantity supplied will decrease. I agree with Taylor L.’s idea that an employer in this costly situation will lay off employees. Employers will be inclined to hire fewer workers and also cut employee hours in order to save on operating expenses. An alternative solution for employers to consider is moving the establishment to a third world country where the production cost is cheaper, though this could raise many controversial topics such as hindering United States economic growth or third world country worker’s rights. One might look at the situation differently, however, when considering the extremely large gross margins of low-wage employers such as Wal-Mart, Target, or McDonald’s. According to raisetheminimumwage.com, these are corporations that certainly could have afforded to raise their employee’s low wages before Obama called for an increase in minimum wage. Now that these big employers are faced with a minimum wage increase, their gross margins are likely to fall, but the company overall will not be largely impacted because, even with a higher minimum wage, they can still sustain themselves with their large profits. These companies may not need to make as drastic adjustments, like laying off workers and cutting employees’ hours, in order to keep thriving.
Nick Ferraro
In theory, the pros of increasing the minimum wage are more money for low-skilled workers and an increased incentive for those in poverty to work. The majority of minimum wage jobs are physically demanding jobs in the field of fast food restaurants and large retail and grocery stores, to each a plethora of work force. With the low cost to hire employees at minimum wage, these businesses are able to lower the cost of the goods they produce. In the past these jobs have offered high-energy, first-time employees, such as high schoolers a way to enter the workforce allowing them to build crucial work foundation and experience. If minimum wage was increased, many of these jobs would be lost as the cost to run the businesses would increase substantially and more aged employees potentially enter this field. Since there is a surplus of labor, businesses can now choose the employee they see most fit, potentially discriminating against younger workers with no family to support. With less workforce and a higher cost to employ this workforce, prices of the goods they produce will likely rise. This would likely result in the cost of living for everyone to rise as well perhaps offsetting much of the added gain of the new wages.
There are many people who are excited about the possible increase in the minimum wage. For people who already being paid at the current minimum wage, it would definitely be a benefit since they would be earning more money while doing the same level of work. Unfortunately it could cause some business owners to reduce their work force if they can’t afford to maintain the same work force at the increase wage. There will also be increase competition for those trying to obtain a minimum wage job, since more people will try and get one of the better paying jobs.
Current minimum wage employees receive the benefit of a higher wage, but are also at risk of losing their jobs if the employer were to decide to look for a replacement worker. This could be a benefit for the business because the employees would be forced to work more efficiently in order to keep their job, which could bring the company more revenue which could be used to hire more employees. So while raising the minimum wage might not help with poverty levels, it could benefit the individual business owner by having a larger pool of potential employees.
Personally, I don’t think that raising the minimum wage will cost more to employers, and not help struggling families as much as the legislators would like. Typically, teenagers and other people work the low skill jobs, especially in restaurants and fast food chains, such as McDonalds. If employers now had to increase wages for the lowest level positions, it would discourage employers from hiring as many workers. They would possibly hire a teenager over a single parent, because if they had to cut the worker at some point in the future, it would be easier for a company to fire a teenager, rather than a single parent that needs the income to help care for his/her family. Maybe if a single parent worked two or more minimum wage jobs, then the increase in the minimum wage would help out that parent tremendously.
The very first point Michael Saltsman brings up in his article, “The $9 Minimum Wage That Already Exists” is exactly that; “For many…single parents in particular, the minimum wage is already above $9 an hour.” Thanks to the Earned Income Tax Credit, most single parents are already receiving higher than the national price floor of $7.25 an hour. This funding created by President Ford allows for single workers who do have children to file a tax return and get money from the government in addition to their wages. If President Obama raises the national minimum wage, the people he will be helping won’t really be the single parents. It will be others who work for minimum wage, such as students or part-time workers. However, he wouldn’t really be helping them either. Since normally minimum wage jobs do not require much skill or experience, those who are the “bottom of the barrel” will be cut in order to afford the workers that have more experience. Thus, President Obama would be increasing unemployment, which is counterproductive seeing as his goal was to help the less fortunate. While students and part time workers may not have two children at home, it’s still important for them to gain experience and earn money to support their own endeavors. In conclusion, I don’t think it would be beneficial to raise the minimum wage because the cost outweighs the benefits.
The increase of minimum wage is back by popular demand and was recently promoted in President Obama’s 2013 State of the Union Address. When looking at the Omnibus Poll; it is clear that the majority of those adults, who were surveyed, support the 24% increase in minimum wage that President Obama is looking to put in place. It is again illustrated in the Omnibus Poll that the pros of raising the minimum wage include; more money for “15 million low-wage workers” (Raising the Minimum wage Trickle-up economics) and because of this, a decrease in the percentage of people and families living in poverty. But, when employers are faced with the challenge of adding wage increases to the company budget, a big problem arises. According to David Neumark and William Wascher from the Trickle-up economics article, higher wages results in job cuts of low-skilled jobs, directly affecting jobs held by teenagers and minorities. Because these jobs require medium to low amounts of skill, employers are more willing to sacrifice these jobs as a result of higher labor costs. In addition, referencing the class text, an increase in the price floor will create a surplus of the supply of workers and a decrease in the demand ultimately increasing the percentage of unemployed workers especially teenage and minority workers. At some point we need to see through the eyes of the employer to decide if raising the minimum wage will really benefit the economy and low-income households or if will just increase unemployment.
Amy Goffe
Raising the minimum wage may appear as a good idea at first glance, however other results can occur rather than just the assumed benefit of more money for the employee. By raising the minimum wage, the demand for these typical jobs associated with teenagers that do not require great skill will increase, however the supply will stay fairly the same, possibly causing employers to fire current workers due to the increase in labor costs as Taylor L. stated. On the other hand, if employers are not making employee cuts, with the increase in minimum wage, they will now have the opportunity as well as want to hire the most qualified person to ensure this greater wage is not going to waste. This can also result in discrimination towards future employees. Employers will have to decide who they want to hire: an average teenager who the employee knows is only responsible for his or herself or an unemployed single-parent. The employer may hire the single-parent because he or she may think they need the money more than the teenager, although the teenager may be considered more qualified for the position. If so, this leaves teenagers with the short end of the stick, that the minimum wage jobs were typically intended for because of the low level of skill required.
A minimum wage increase would have negative effects on low skilled workers that typically have minimum wage jobs. In The Economist, people bring up the idea that increasing the minimum wage could boost the economy because more people would be spending money. This might be true if you would ignore the fact that some of the lower class would be losing their jobs, going further into poverty, and relying more on the government. Increasing the minimum wage would make the job market more competitive for low skilled workers and also bring new challenges to running a small independent business. Huge corporations are making enough money to be able to withstand these changes, but small businesses are very fragile. I’m in favor of increasing tax breaks for small businesses that hire welfare-aided workers, that seems like a much more effective way of helping the single parent families without making the job market even more competitive or hurting small businesses.
Our minimum wage is low on a global level and has not been rising with inflation. Wages in today’s dollars are at an all time low compared to past years. Raising minimum wage, while risky, would be beneficial to more than 28 million workers. While some workers are only teenagers, working with the purpose of earning spending money, more than a quarter of minimum wage workers are parents and more than a third of minimum wage workers are married. Now, more than ever before, people working at minimum wage jobs have some sort of college education, a startling 42% of workers, and more than 35% have a high school education. More than half of affected workers are working full time, or more than 35 hours a week. These figures address the common misconception that minimum wage workers are teenagers and not supporting their families. So many workers and supporters have to cut back and regulate their household finances because they don’t make enough money. Raising their wages would help alleviate the stress on their pocketbooks.
Some opponents of raising minimum wage claim it would not help those supporting families or that it would lead to employers cutting hours or laying off workers. While this is a possibility, it’s more likely that higher wages will improve workers purchasing power and those workers will consume more. While producer’s costs would rise, so would demand. Americans are a consuming, “stuff” obsessed culture. When people make more money, they spend more money. I’m not saying they’re going to go out and start a new business with their extra cash, but they’ll certainly go out and spend more at the movie theatre.
Raising minimum wage isn’t a cure all, but it would certainly help our current economic predicament.
According to the Bureau of Labor Statistics, less than 3% of the workers earning minimum wage are over the age of 25. Most of these people are supporting only themselves, although more retirees are looking at part-time and minimum wage jobs to supplement their social security and pension. About 2/3 of low-wage workers are working for large companies which have higher capabilities to absorb the additional costs associated with an increase in the minimum wage. However, these companies are used to having a certain profit level so they are more likely to be more selective on their hiring practices. By increasing the minimum wage, it can affect some small businesses more than others because they do not have this luxury to absorb the higher expenses. They will have to find a way though a reduction in their workforce or by raising their prices. When you have a household budget and your rent goes up, you have to make concessions somewhere else to make up the difference; for example, not buying as many clothes or going out to dinner as often. This is also truth with businesses; employees will now become more selective about their hiring, wanting people with more experience or with certain physical capabilities. Those with families that are working minimum wage jobs are working more than one job, and even with an increase, they will still need to work more than one job to get above the poverty level. With employers being selective with their hiring, finding that second job that would fit their needs would be difficult for these families and would not necessarily offer them the advantages that they seek.
At first glance, it is easy to understand why people would support the increase of minimum wages. An increase in wages means more money for those workers. However, according to the article “the $9 minimum wage that already exists,” increasing minimum wages actually increases unemployment. If a company or firm sets aside a certain amount of money to pay their employees, an increase in wages only alludes to a decrease in the amount of employees that can be paid. Many jobs that pay the minimum wage hire low skilled employees that cannot get a better job elsewhere. As discussed in “trickle-up economics,” raising the minimum wage would cost the lowest skilled employees their jobs. As talked about in class, this leads to a surplus of unemployed workers which in turn leads to harsher discrimination towards employees. Raising the minimum wage does help the low skilled workers that do get hired, but as a whole it hurts low skilled workers by raising the amount of discrimination and unemployment.
While several comments above have given the reasonable claim that an increase in minimum wage will result in a decrease in jobs, a number of economists and I disagree based upon new research. An article on Bloomberg.com suggests that previous studies, which indicated job loss upon a rise in minimum wage, tended not to control for regional economic trends. It says these trends, such as a “manufacturing-dependent state that was shedding jobs”, were already affecting employment and that their affects were being incorrectly correlated to a rise in minimum wage. In 2010, Arindrajit Dube of the University of Massachusetts-Amherst concluded a 16 year experiment that compared employment levels with minimum-wage levels in different areas. His research was conducted while looking at micro-level employment patterns in order to gain a more accurate insight into the relationship between employment and minimum wage. In his paper on this experiment, he said there were “strong earnings effects and no employment effects of minimum wage increases.” He also added that the workers who received an increase in wages immediately went out and spent their additional earnings, which provided a small boost to the economy. (http://www.bloomberg.com/news/2012-04-16/u-s-minimum-wage-lower-than-in-lbj-era-needs-a-raise.html) In my opinion, because of Dube’s findings, the minimum wage should be increased and this increase will not only provide economic benefits to the minimum-wage workers, but also to the national economy.
The minimum wage is supposedly placed in order to provide job incentives and offer job security, while conversely can slow job growth. According to the Forbes article “Raising the Minimum Wage Will Kill Jobs,” firms cannot pay a worker more than the value the worker brings to the firm or else the firm will fail and look towards a bailout. If the minimum wage is raised, it makes it harder for unemployed workers to get a job if they ever decide they want to obtain one and creates a justification for them to be hired, respectively preventing the poverty level to go down and the economy to be continuously burdened by the impoverished. The Forbes article underlines 60% of the “officially poor” are unemployed and not controlling the minimum wage jobs. Business Week mentions that 44% of the minimum-waged workers either attended or graduated from college. Therefore, raising the wage will create competition between more educated workers, thus lessening the chance for lower skilled and demographically inferior workers to obtain jobs.
I could obviously see the point that President Obama is trying to make, he wants the poverty level to drop and wants kids to be able to support their families, in the event that it becomes necessary. I agree one hundred percent with raising the minimum wage because it allows Americans in general to gain more money, and the more money we have, the more we spend. Therefore ultimately, the economy will benefit in the long run. I understand that the jobs that do pay minimum wage are the more physically demanding jobs such as fast food restaurants and grocery stores, like Nick Ferraro exclaimed. These jobs call for minimum wage pay because you do not necessarily need to be educated and they aren’t essentially what one would call a dream job. Mostly teenagers work at these places to gain a decent pay. I don’t necessarily agree with the fact that more people will be competing for these jobs because the average American would rather not work at all then work at a fast food place.
Although an argument can be made that increasing the minimum wage would put more money in the pockets of the workers, we need to look at how much money workers are already making. Typically the people who are working minimum wage jobs are on average teenagers working part-time to make some extra cash or typically are migrant workers. In the case of teenage workers hired part-time, they are doing this job to make some extra cash so an emphasis should not be put on raising money for them because they are already better off with this low paying job then unemployed. In the case of low-income families and migrant workers, we have to consider how our minimum wage compares to others. For example, the minimum wage currently is 7.25 versus the minimum wage in Mexico is 62.33 pesos which is equal to about 4.60 a day in U.S. dollars (and can be even lower in some other regions). http://www.maquilareference.com/index.php/doing-business-in-mexico/115-what-is-the-minimum-wage-in-mexico. One can look at that and can see that the standard of living in the U.S. is so much higher than other countries, so although migrant workers are making minimum wage here, that is an improvement on the money they would make back home (why many people migrate to America in the first place). Furthermore, the way our free-market system works is we pay for pay for goods and services based on how much we think they are worth, driving innovation through competition. If we look at the issue of minimum wage from a strictly free-market system point of view, and remove the emotional attachment to a person, we realize that we are paying for what we think the service is worth. The question is do we (the employers) think flipping burgers somewhere is worth being paid 9 dollars an hour when that skill set is not highly specialized? It is not the job of employers to worry about the well-being of the employees in a free-market system but to pay what they think the service they are being provided is worth.
According to the CNN Money article, “Minimum wage jobs on the decline”, the number of people working for federal minimum wage dropped by an estimated 200,000 in the past year. This is understandable, as minimum wage jobs do not always provide people with a suitable income, especially in areas of the country with a higher cost of living. Northern Virginia accounts for one of the highest costs of living in the nation. A single parent earning minimum wage could certainly face difficulties raising children because of the living expenses associated with the Northern Virginia suburbs.
The decreasing number of people working for minimum wage is no surprise, as many people do not want to settle for $7.25 an hour. Even younger students searching for summer jobs are dissatisfied with working at minimum wage. According to the U.S. Bureau of Labor Statistics, workers earning $7.25 tend to be female, single, young, and lacking a high school diploma. Contrary to popular belief, race does not make a difference. About 5% of white, black, and Latino hourly workers earn minimum wage. CNN’s article also notes that the federal stats miss many minimum wage workers because they don’t include workers (such as housekeepers) who earn a fixed weekly salary at the hourly minimum wage rate.
The Obama Administration knows the pros and the cons of raising the minimum wage. They are a highly educated group of people and they know the basics of economics that we are learning this semester. It is a morale booster for the class of people that are making minimum wage and for people who are unemployed. Of course one could look at it the other way and say it is deceitful to position raising minimum wage as a good thing. As we have recently studied, raising the minimum wage raises the supply of people willing to work for the higher price while simultaneously making it harder for employers to employ as many people at that price. The article in The American Thinker titled “Minimum Wage: Taxation by Misrepresentation” is scathing of the minimum wage plan but does bring up a few good points. It points out that while it is a “feel good” message Obama is trying to put out there, it really doesn’t help anyone. Nine dollars is still not sufficient to raise a family and at the same time it causes prices for the rest of us to go up to compensate for higher wages. I understand the message that Obama is trying to push, but I’m not so sure that it will do more good than harm.
Is it the responsibility of employers to provide fair wages? I don’t think so.
Given that we live in a free market economy, employers shouldn’t be morally or legally obligated to provide fair wages for employees. The reason behind this being that if employees are dissatisfied with the wages they are provided, they can seek employment elsewhere. Thus, employers are economically obligated, not just because “they should,” or because they have a duty to an employee and their family.
As a recent article from The New York Times shows, if employers are unwilling to compensate their workers at a level equal to or greater than they would like to be compensated, they will face worker shortages while other businesses (that require lesser skill sets, like managing a shift at McDonalds) face surpluses. If workers are provided proper incentives to invest in the qualifications necessary to get a job, chances are, they’ll take a higher paying job.
Additionally, I tend to disagree with many of the above commenters that raising the minimum wage will increase unemployment. Looking to this graph, complied from U.S. Bureau of Labor Statistics data, between 2006 and 2008 there was no major spike in unemployment when the minimum wage was raised nearly 12% (the spike you see at the end of the graph is likely the beginning of the 2008 recession). Although it would make sense intuitively (law of supply and demand), the number of factors involved with the unemployment rate makes it seem unlikely that just a minimum wage increase would ravage the job market. This article from The Economist supports this idea and even suggests an increase would create jobs.
The youth of America are the driving force of minimum wage labor. Over half the people paid minimum wage, 53 percent, are under the age of 23. This accounts for all the teenagers in high school as well as college students that work part time jobs to have a small source of income both that combine to equal a 63 percent of those under 23 and 33.4 percent total of the minimum wage force. The other 47 percent are workers aged 23 and older who live in poor families. Most of these poor families have a combined income of over thirty-eight thousand. Less than 21 percent of the minimum wage earners are the sole providers for their family and only 5 percent are single mothers. Therefore, single parents make up a small percentage of the wage force, and even smaller are those that provide for two children.
http://www.heritage.org/research/reports/2001/06/who-is-paid-the-minimum-wage
Most would say that the aesthetics behind raising the minimum wage generally fulfill what they were supposed to do, i.e. give people who occupy menial jobs an extra edge so as they may have a more monetarily reinforced life. Politically, the proposal is sound; it’s a populist. Both parties may come together through some pseudo bipartisanship to alleviate the living standards of the country’s lower class citizens. So, as this raises the nations fondest price floor, one asks ‘will it work?’ We know already that the standard of living far exceeds what most lower class employees earn from these jobs; therefore, with a wage of $7.25 one barely scrapes by, teetering over the poverty line. In spite of the living wage, which in Harrisonburg came to be around $8.52 for an adult without children up to $30.15 for a single parent caring for three kids and the poverty wage at $8.80 for a single parent and three kids, when Congress passes the deal the adverse effects may be detrimental. As such, the market equilibrium would be set higher than what it should be and as more people want to work, employers will want to hire less (even some would say become more discriminatory), leading to discouraged workers leaving the labor force entirely, causing many to fall back on welfare (and in a more market based economy such as the U.S., its much harder to get by). Why is it like this? The United States obviously lags behind its peer European industrialized welfare states in the public sector, as it is handicapped to the three tracks of insurance, public assistance, and taxation, albeit where in the private sector there is a plethora of benefits for employees and healthcare benefits and charities. But as the government raises the minimum wage, it may unintentionally shoot up firms’ costs, leading many people to lose private sector amenities. For those who need it most, it would be detrimental. I’m not trying to throw the word socialism around lightly; nevertheless, in the mixed economy we have, when the government raises minimum wage, it can’t leave the private sector alone to fend for itself as it may adversely affect the initial benefits to employees. See http://www.jstor.org/stable/30031061?seq=7 for more information.
According to the polls, majority of people support the idea to raise minimum wage from $7.25 to $9. Majority of people also said it would help workers rather than hurt workers. If minimum wage were to rise, it would definitely help certain employees, especially teenagers. However, a lot of people would get laid off, so it would only help those people who are still hired at those low paying jobs. Most people that work minimum paying jobs are students, or people that do not need money to raise a family. No matter what policies go in place, there is always going to be poverty. Increasing minimum wage is not going to solve that because the article ‘Op-ed says 60% of people below the poverty line simply aren’t working. The increase in minimum wage will increase the demand for people to want jobs, but as we learned in class, the supply will decrease, causing a surplus in workers, therefore raising minimum wage will only help those select few with jobs.
During the State of the Union Address, President Obama stated that there will be an increase in the minimum wage from $7.25 to $9 an hour. According to the Omnibus Poll, 51% of Americans feel as though increasing the minimum wage by 25% will help low-skilled workers by giving them an opportunity to earn more money. Hopefully this will decrease the amount of citizens that need government support, increase advanced education of low income families and overall earn a higher income that can support a healthy family. Although increasing the minimum wage may look good on paper, employers may be looking at it from a different angle. The Omnibus Poll also stated that only 30% of Americans think that the minimum wage will end up hurting workers. The increase from $7.25 to $9 may lead more companies to increase layoffs or reduce hours because of the higher labor costs, which in the end would only increase the overall unemployment or reduce the general income of low-skilled employees in the work force. This could potentially benefit employers because with a surplus of workers, they may get to pick and choose which employee would work better at the company. The Journal of Human Resources in 2005 explained that the losers (those moving closer to the poverty line) from the policy of increasing the minimum wage, outnumbered the winners.
Many people believe that increasing the minimum wage is great for the economy because they think it will increase money and decrease poverty. President Obama, although may be seen as a “savior” in aiding low-income families, would not create a significant change in the economy at all by putting a higher price floor on the current minimum wage. According to epionline.org, minimum wage increases have no appreciable impact on the poverty. Just because the minimum wage is raised, that does not mean that more people are willing to go out and get jobs. If a single mother with children is already unemployed, a small increase in the minimum wage will not boost her want to get a job. I realize that in our current economy it may be difficult for under qualified people to get jobs, but I believe the main reason people are unemployed has nothing to do with the minimum wage value. Researchers from Cornell and American University have found that among those that do work and earn the minimum wage, the vast majority live in household above the poverty line. The ability to get free handouts from the government acts as a deterrent to people looking for a job. Why work when you can get stuff for free? Unfortunately, this is a common view of many people in the United States. A better incentive to aid low-income families is the Earned Income Tax Credit as stated by Michael Saltsman in “Op-ed”. It benefits those at the bottom of the pay scale without putting their jobs at risk. Free riders will not be able to sneak through and only those with true intent to better themselves will be benefited.
According to http://www.aei-ideas.org, a hike in the minimum wage will cause low-skilled people to have a smaller chance of getting a job. Mark Perry, an economics professor at The University of Michigan, stated that unemployment rate for teenagers rose 10% the last time the minimum wage rose more that 41%. As businesses are forced to raise the wage they pay to their employees, it is only natural that their hiring standards follow suit. If I owned a business and the minimum wage increased, I would be more cautious of whom I hire. Therefore, those who are under qualified are worse off than they originally were.
Although money may be put into the economy by raising the wages of employees, the drawbacks of increasing minimum wage include possible higher unemployment due to higher labor costs. Large corporations may not be affected, but minimum wage employers such as fast-food restaurants, farms, and other entry-level jobs will suffer from higher expenses. According to the FOX Business video, many employers may be forced to cut hours and shifts of those who have no previous skill sets. Teenagers and other low-education workers may be forced out of the only jobs they can acquire, raising unemployment. Since these jobs are bottom of the totem pole, so to speak, there is less chance that these people can move forward without increased education. Also, as these costs of production rise, many other product prices will be forced to increase, driving inflation faster. As prices of many goods go up, the minimum wage may again become troublesome to those working at the bottom, for prices will be similar, adjusted for inflation. In conclusion, raising the minimum wage may simply add more problems in the long run than were originally intended by economists who supported this change.
-Taylor Tutwiler
President Barack Obama may look like a rescuer for wanting to increase the minimum wage to $9.00/hour, when realistically he is not addressing what the true problem is. In Saltsmans article, he stated that, “60% of people living below the poverty line didn’t work last year.” This statistic is where the true problem lays. Even if the minimum wage was to be increased by $1.75, it would only benefit those that are currently employed. I believe the solution to the problem of those working minimum wage jobs, but not having a livable salary is for the government to implement the ETIC to help them reach a comfortable, livable salary. In the other case, for those that are unemployed, the government should formulate education programs for them to learn and improve skills, which will eventually lead to them being able to compete for jobs that they currently do not have the skills for. Increasing the minimum wage may seem like the immediate solution to decreasing poverty nationally, but there is much more to the problem than just the amount of wage per hour a person is receiving for their services.
http://epionline.org/oped_detail.cfm?oid=220
Jobs generally associated with the minimum wage include low-skill jobs, like fast-food workers, child-care service, agricultural employees, recreational service providers, and many on-campus jobs at universities. These low-skill jobs warrant a low pay; if these jobs paid the big bucks, there would be no incentive to get a higher education. While low-skill jobs warrant a lower pay (as compared to high-skilled jobs, such as technicians, doctors, lawyers, and the like), a raise in the minimum wage is beneficial to workers. In an article by The Economist on February 16th, 2013 entitled “Trickle-Up Economics”, labor and liberal groups assert that the proposal to raise the minimum wage would “reduce poverty and raise the spending power of the poorest workers” in the United States. This, naturally, sounds like the ideal solution. However, the economic consequences of this proposal are hard to predict, as businesses and many Republicans stress that the proposal would cost low-skilled workers their jobs. By raising the minimum wage, business owners are pressured to cut jobs in order to save costs, shifting the hypothetical supply curve for quantity of jobs supplied to the left. This issue has both pros and cons; the decision must be made on the margin.
I can understand why people would believe that raising the minimum wage would help those why are raising families on a minimum raise salary (even though it is an incredibly small percentage of those working minimum wage jobs.) I think what would be more significant is that people who are normally unemployed might be more encouraged to work is they could receive an entire $1.75 higher than previously. It is important, however to look at the employers point of view. An employer will most likely be much pickier about hiring new employees. For example, I work a minimum wage job that really pays too much for the amount of labor and thought I have to put into it. In other words, I am getting paid much higher than I should be. If an employer is required to hire someone for $9.00 an hour, they will go through much greater lengths to find people who will actually work hard enough to earn that money. Another factor is that if the minimum wage goes higher, there will most likely be a significant decrease in the amount of money people can make in promotions or bonuses. Corporations will simply have less money to give. One more significant risk that would come with increasing the minimum wage is that it will be impossible to pass a bill that decreases minimum wage, so it will only get higher and higher until some corporations will have to either go out of business or raise prices more.
Increasing the minimum wage with the intention of helping low-skilled parents support their family would not be an effective way to benefit this demographic. According to a 2006 article from the Heritage Foundation, linked below, only 1.9 million workers reported earning minimum wage or less. This amounts to 2.5 percent of workers making an hourly wage, and 1.5 percent of all working in the United States. Although statistically these numbers seem high, only 6.1 percent of the workers earning minimum wage were single parents working full time. This means that single parents making the minimum wage only make up .15 percent of all workers making the minimum wage, and .09 percent of all workers in the United States.
If the federal minimum wage increases, single parents who are trying to support their families on minimum wage would most likely not receive any benefits; instead this change will benefit 16 to 19 year-old workers, a demographic that is not in need of any immediate wage raise. The demographic of 16 to 19 year-old workers, according to the Bureau of Labor Statistics, creates the highest percentage of all workers paid minimum wage, making up 12 percent of all minimum wage workers in the United States. Therefore, if the federal government really wants to help single-parent families meet the standards of living instead of benefitting most unskilled teenagers, raising the minimum wage would not be the most successful way of going about it.
Heritage Foundation: http://www.heritage.org/research/reports/2006/08/who-earns-the-minimum-wage-single-parents-or-suburban-teenagers
Bureau of Labor Statistics: http://www.bls.gov/cps/minwage2012tbls.htm
A common argument and belief is that raising the minimum wage would cause small businesses to not be able to afford to pay all of their workers and, because of this, they would have to lay off some employees, or higher less in the first place. This would lead to less job opportunities and therefore, more unemployed people. However, this is not true. According to a 2004 study by the Fiscal Policy Institute, the small business growth doubled after the 1997 increase to the minimum wage. This statistic proves that the raising of the minimum wage would in fact benefit small business growth, and by extension, the employers of small businesses. When the minimum wage is raised, the employees now have more of an initiative to work. This then translates to higher performance and more people to seek jobs. If more people are looking for jobs, then employers can choose the more skilled workers of the bunch. Employers and employees now both benefit from a raise in minimum wage. It allows for employess who are going to do a good job to get hired and paid more, and for employers to have a more effiecient work force which would allow for better production and sales.
Chron, Small Business By Demand Media. The Impact of Raising the Minimum Wage
http://smallbusiness.chron.com/impact-raising-minimum-wage-4938.html
After reading over the previous comments, it is clear that there are numerous opinions on increasing the minimum wage. It is initially looked at as being a benefit to the poor by raising the wages of those who are already employed. Then they will be able to provide more for themselves or their family. However, it seems that this is merely wishful thinking. While it has good intentions, it also has bad results. Many business owners will have to take a cut out of their own pay, which then has a domino effect on releasing their employees to maintain the wages. Minimum wage employees are already categorized as low skilled workers, and they won’t have many options left after being laid off. Discrimination also comes into play when employers want the best workers for their money. If they have to choose between someone who has the qualified skills and an inexperienced teenage Joe Schmo, they’re going to choose the qualified worker. So teenagers among others are left out. Raising wages will also have an effect on the consumer, because business owners will have to raise their prices.
In response to Obama’s State of the Union Address, many people immediately argued against his proposal. They claim that as a result of raising minimum wage, employers will cut their number of employees and unemployment rate will go down. Many of the previous comments are against Obama’s proposal to increase minimum wage from &7.25 to $9 by 2015. However, I believe that the increase of minimum wage will reduce unemployment rate, and will help single families. The current minimum wage is not livable for anyone, and although $9 an hour still does not reach the poverty level of 19,530 according to the 2013 Poverty Guidelines, this raise will be taking a huge step forward to meeting that threshold. Our fiscal inflation has consistently grown making expenditures increase and the money scarce. Even a small increase in minimum wage will provide more money to aid in family expenditures. Christian Dorsey of the Economic Policy Institute expressed his thoughts in the video, “Increasing Minimum Wage Good or Bad for Small Business?” on the Fox Business website, that this minimum wage increase will make productivity soar. He also adds that it will carry employees to efficient economic spending resulting in aid to people living in poverty. I think that the higher wage will improve the quality of work, will motivate job seekers, and people will be more apt to excel in these low-wage jobs. In Obama’s State of the Union Address, he said that he wanted to bring in more work for these low-wage workers, which well increase more job opportunities, thus decreasing unemployment rate. Overall, I feel that it is vital for our economy to increase minimum wage to create success in unemployment rate and for employers.
http://www.cbsnews.com/video/watch/?id=50140940n
Although it may seem as though Obama’s proposal to increase the minimum wage to $9 is the admirable thing to do, doing so would have strong implications on our economy as a whole. Undeniably, increasing the minimum wage would benefit the workers that hold these unskilled jobs, who can be generalized as being teenagers or immigrants for the most part. It would put more money in their pockets’ and allow for them to buy more “stuff”. The ability to buy more “stuff” is becoming a way to judge the standard of living, at least in America. Using this logic, increasing the minimum wage would increase the standard of living for the poor. What the proponents of increasing the minimum wage don’t see is that its secondary effects would actually hurt our economy, in turn negatively affecting the individuals it was implemented to aid. The article “the $9 minimum wage that already exists” makes the simple assertion that increasing minimum wage actually increases unemployment. Although a simple statement, understand the reasons behind this can be difficult. Companies and firms are in business to make money and to be able to produce their good or service, they require employees. They budget out how much they can pay employees while keeping their profit margins as desired. The only way to keep profit margins the same after increasing the minimum wage is to keep fewer employees on the payroll, thus the need to lay off workers. Since many of the other obvious issues of increasing the minimum wage have been discussed, I will attempt to conceptualize the less apparent problems it could potentially cause in the future. As we talked about in class, firms hiring less employees leads to a surplus of unemployed workers which in turn leads to harsher discrimination toward employees. However, firms have another option that is becoming more and more prevalent despite its legality issues. Some employers will decide that the cost to pay an American citizen is too high with a minimum wage of $9. However, many illegal immigrants would be more than willing to work for much less because more than likely, that is still much more than they would be getting paid in their home country. This causes unlawful agreements and methods that often include the employee being paid under the table. Not only does this leave needy Americans out of a job, but also decreases revenue the government would make through taxation because illegals are not likely to pay taxes, especially if they are paid in cash. Another consideration to bear in mind with this issue is the idea we talked about in class that as minimum wage gets higher and higher, there will eventually be a point where any individual decides, “yes, that amount is worth it for me to be an unskilled worker for the rest of my life”. For some people that amount is higher than others, but in theory everyone has a price. As we increase the incentives for unskilled labor, logic dictates that an increased number of our population will opt against taking the route of attaining an education in order to land a skilled job. If that trend continues long enough, firms will potentially decide to move to other countries to conduct their business due to the reduced number of skilled workers here in the U.S. and the increased opportunity of monetary gain elsewhere.
To strengthen the argument I made in my earlier post, I found an article from MSNBC talking about the positives of raising the Earned Income Tax credit, rather than the minimum wage like Obama is proposing to do (http://tv.msnbc.com/2013/02/14/opponents-to-minimum-wage-hike-propose-raising-eitc-instead/). In this article, the Earned Income Tax Credit is “a refundable federal income tax credit for low to moderate income working individuals and families,” according to the International Revenue Service, and the amount of money that can be claimed depends on your marital status, annual income, and number of kids you have. Some argue that the EITC is much more effective than welfare policies because it keeps people in the workforce, and lessens the load of welfare on the government. Also, individuals can only collect money from the EITC only if they are working, unlike welfare. Finally, critics of the increasing minimum wage argue that the EITC is more advantageous for businesses, because it enables them to hire more workers, and not have to increase their wages for the low skill jobs.
In the Bureau of Labor Statistics’ 2011 report on the characteristics of minimum wage workers, the different statistics on who, of the general population, is receiving minimum wage is outlined. People 25 years or younger made up about half of those making minimum wage or less. Those who were single and had never been married were about twice as likely to be making minimum wage as those who were married and those who had another type of marital status. Based on the information from these statistics it is likely that an increase in minimum wage would not actually help very many single parents with children. The increase would be most likely to benefit the young single workers, who do not necessarily need an increase in income. This is assuming that industries did not lay off workers because the increase made them unable to sustain the number of employees that they currently have working. Although President Obama’s plan is popular with much of the general population, an increase in the minimum wage may not actually benefit those that it is intended to and whom people assume the plan is going to help.
The local Mom and Pop pet store in my area pays many of there employees minimum wage. These are exactly the type of businesses that will suffer, and employees who will benefit from the raising of the minimum wage. Almost all employees who are currently being paid minimum wage are in favor of a raise (http://raisetheminimumwage.org/). on the other side of this equation is the exact opposite for small business’s. Small bushiness’s thrive on small closely protected profit margins (http://www.sba.gov/).Raising the Minimum wage could seriously put struggling or just starting bushiness’s in the red. Unfortunately this could cause the business to be forced to fire employees in order to have the funds to pay the new minimum wage to some. This could produce the exact opposite effect of what was intended by possibly lowering the amount of employed non skilled workers.
In the last 30 years Congress has passed legislation to raise the minimum wage and there is now another attempt to raise it again. The cons of raising minimum wage are that jobs will be more competitive because businesses will have to make employee cuts if they have to pay their employees more. Therefore those employees who are less skilled, but in need of the money may find themselves out of a job. So while many people may be helped by the raise, a lot will find themselves unemployed because of the greater supply of workers compared to the demand for workers. The pros however are persuasive. The federal minimum wage right now is 7.25 and 19 states have already raised their minimum wage, but in all the states of the US any employee at minimum wage working a 40 hour work week is not able to afford a two-bedroom apartment. If minimum wage is not enough to cover basic needs like shelter it can be argued that it should be raised. If it were up to me I would move to raise the minimum wage so that basic needs of everyday employees could be met.
http://www.raisetheminimumwage.com/
There are many interesting comments regarding the raise of the minimum wage and it can be attributed to the difficulty of supporting oneself on a minimum wage salary, netting in just over $15,000 a year. With the minimum wage increasing in 2009, it seems necessary to re-raise the tax given inflation over time. This is because the minimum wage should be accounted for inflation on a regular basis, however the government does not follow this. According to a Bloomberg.com article titled “Raise the Wage” the adjusted minimum wage should be over $11. One interesting question to answer is whether the employers are responsible to pay wages that allow employees to live on. This is very controversial because everyone employee is different and spends their money in a different way. For instance, a recent Yahoo Finance article explained how a family of four lives on a $14,000 salary whereas there are individuals who have debt in the tens of thousands of dollars and make twice that much. The responsibility of the employer is to pay its employees fairly. If that is minimum wage, then that is what the employers will make. The minimum wage, a price floor, is determined by the government and therefore I think it is the government’s responsibility to make sure employers pay enough for people to live. That means the government should know if the minimum wage is higher enough to support the life of those making it. While raising the wage will cost more, RaisetheMinimumWage.com reports that business will not leave since many are in the service sector and a University of Berkley study by Reich, Hall, and Jacobs showed that increased wages improve the performance of the employee. To counter that, however, a book I read a few months titled “Drive” shows that money based incentives work only for a short period of time until people crave for more. In all, I feel the wage should be increased to a level that ensures people can live and not be in poverty but that responsibility is on the government to determine that level.
While it’s nice to imagine that raising the minimum wage would work leaps and bounds to improve the lives of single parents struggling to make ends meet, in the grand scheme of things they aren’t the ones most affected by this potential move. According to the Department of Labor Statistics, about half of the workers being paid minimum wage are age 25 younger, in spite of the fact that they make up only about 20 percent of the work force. Ultimately, very young people are the ones most frequently earning minimum wage, and they’re the ones most directly impacted by these arguments about potentially raising it. Another study by the Department of Labor Statistics cites the current teen unemployment rate at 17.1 percent as of July 2012; ultimately, raising the minimum wage would only serve to make those rates go up, and companies would be less and less inclined to hire their cheap (and not necessarily essential) labor as a result of these higher costs. An increase in the minimum wage would not put more money into the hands of these single parents; it would increase competition amongst young people, as they are the largest population of workers earning the minimum wage.
http://www.bls.gov/cps/minwage2012.htm
http://www.bls.gov/news.release/youth.nr0.htm
Raising the minimum wage presents a risk vs. reward situation. The risk as stated is that the higher wage will lead to employers hiring fewer workers. This would result in the poverty situation improving for some, but getting worse for families that lose jobs. The reward is the opposite of this, that the jobs will all remain would mean the poverty situation getting much better. As to which of these will result, no one is truly certain. In a survey of economists by University of Chicago’s Booth School of Business the economists were split and unsure as to wether or not the higher minimum wage will make it harder for people to find jobs, but 57 percent said it was worth the risk and another 23 were neutral. This supports the claim that increasing the minimum wage is worth the potential risk of less jobs for the benefit of a higher wage.
http://www.igmchicago.org/igm-economic-experts-panel/poll-results?SurveyID=SV_br0IEq5a9E77NMV
There are two universal skills that one must have in order to be successful at a minimum paying job. These two “skills” include showing up on time and doing what your boss tells you to do. Basically, anyone can get a minimum wage job as long as they have a clean record and as long as employers are hiring. Raising the minimum wage to $9.00 an hour would increase the number of candidates willing to work a low-skill, minimum wage job. We live in a day and age where single parents are trying to work multiple low-paying jobs in order to support their struggling families. Raising the minimum wage, although sounding good on the surface, may not be favorable to the people fitting this single parent mold. As stated in class, a higher wage will attract more candidates willing to work who always believed they were too good for a job that pays $7.25. If looking to hire, employers would hire the better educated, more qualified individuals, most likely leaving these single parents left in the dust. Although beneficial to most people who think they are “above” working a minimum wage job, an increase in minimum wage would hurt single parent homes.
Based off of comments above (Kemp Bartlett), I agree that by raising the minimum wage, mostly mom and pop stores will be the businesses who suffer. These home town companies may also be more likely to recognize when a dedicated individual may need a pay increase in order to provide for their family. So long as the company still has a profit margine large enough to compensate for the owners. Companies such as walmart, who have a larger profit margine, will be able to afford paying for the additional wage increases. However, when the president of the united states addresses the people of the nation saying that he plans on supporting single parent families by raising their salary, nobody is going to disagree with him on that. The majority of america probably does not understand the repercussions of raising the minimum wage. But I think just about everyone in america would agree that if a single parent is raising two kids by themselves and is having financial troubles, they would probably say so long as the parent was capable then that family should receive aid. By saying we will increase their wages, the president is also implying that these underprivileged families will be earning what they have. Rather than receiving a hand out. Unfortunately, money does not speak the same language.
GECON 200: Kevin Simpson
With the adjustment and manipulation of the minimum wage rate comes substantial consequences on both sides of the spectrum, both positive and negative. Although it is simple to claim that to help poor workers and working mothers we should raise the minimum wage rate, this change correlates to multiple negative effects that outweigh the one positive effect of these employees making more money. If employers are faced with minimum wage increases this would very likely cause them to both lay off some current employees and also cut hours in order to make up for the money lost to the higher wage rate. So, these employees could ultimately be hurt by the minimum wage rate increasing because they may be let go from their employer or given even fewer hours to work. Rather than facing millions of job losses it would be better to keep the minimum wage rate where it is currently. Also, many of these “single working mothers” do not actually receive minimum wage when you look into the matter. Michael Saltsman from the Wall Street Journal states, “President Obama used his State of the Union address to call for a 24% increase in the federal minimum wage, to $9 an hour from its current $7.25. He left out an important detail: For many low-wage employees, single parents in particular, the minimum wage is already above $9 an hour. That is because of the Earned Income Tax Credit, which boosts wages for workers at the bottom of the pay scale without putting their jobs or incomes at risk—which is one consequence of hiking the minimum wage.” This Earned Income Tax Credit provides a compensation for those living off of minimum wage.
It can also be argued that most employees who are earning minimum wage are not single mothers but instead working teenagers and young adults. The United States department of labor statistics states that in 2010, “Minimum wage workers tend to be young. Although workers under age 25 represented only about one-fifth of hourly-paid workers, they made up about half of those paid the Federal minimum wage or less”(URL to source posted below). Therefore it is unnecessary to raise the minimum wage because it would not be benefiting many single working mothers but instead, teenagers who do not necessarily need that much more income.
http://www.bls.gov/cps/minwage2010.htm
An employer has a normative responsibility to provide wages that their employees can live on, and that allow the employee to exceed the poverty line. According to the Institute for Research on Poverty, the federal poverty threshold for a household of three is $17,916. Regardless of the minimum wage, employees should pay wages beyond poverty levels in a normative context. A multiyear, quantitative study from the Urban Institute found that parents in low-income jobs tend to arrange child-care according to employers’ needs rather than in the optimal developmental needs of the child. This undercuts the U.S. education system, thus leaving kids behind intellectually and potentially encouraging more low-income workers in the future. Beyond education, those in poverty rank higher in potential to engage in crime (according to poverties.org). Crime increases the burden on government spending, as law-enforcement resources and penitentiaries all require government funding. With all of these negative consequences of poverty, employers certainly have a normative responsibility to keep employees above the line.
However, from a ‘positive’ economic perspective, employers do not have this responsibility. A business normally has one primary objective: to increase profitability. Therefore, the only responsibility in this context is to meet that objective. If this means keeping wages as low as the minimum wage, than that is its responsibility.
Matthew Gurniak
By increasing the minimum wage, President Obama suggests that it will benefit low-skilled parents by enabling them to earn sufficient income to provide for their families. Though, if one simply looks at a supply and demand curve, they will find that a higher price floor—$9.00 an hour—creates a surplus of potential workers. With more people from whom to choose, employers can hire with greater discretion—likely hiring a teenager with fewer financial needs over risking hiring a single mother supporting two children who may miss work or request a raise. This scenario challenges the president’s entire purpose for raising the current minimum wage.
These newfound costs imposed upon employers after the minimum wage increase will ultimately be incurred by consumers. Companies will compensate for the higher wages by either cutting jobs—thus increasing unemployment—or raising prices, which would negate the higher salaries obtained by employees and, again, defeat President Obama’s original intent of mandating a higher minimum wage.
According to change.gov, President Obama believes that people who work full time should not live in poverty, but FamiliesUSA shows that even with the proposed price floor a family of three would make $18,000 a year, which is still below the poverty level. Therefore, increasing the current minimum wage is not a sufficient solution for decreasing poverty or increasing the standard of living for low-income families.
I thought it would be appropriate to ask: What effects would an increase in minimum wage have on the wage gap in America? While it is true that some small businesses will struggle if they have to pay $9.00 an hour instead of $7.25, there will be some companies who will still be able to compete. Then, it is true that for those businesses that are able to compete they will provide better standards of living for those they employee. Economists refer to the “multiplier effect” to explain the concept that if people are earning more money, their demand for products increases. If their demand increases then their purchasing power increases and thus companies are able to supply more. In addition, every year the wage gap increases. An article from the Huffington Post says, “Since 1993, the incomes of the richest 1 percent of Americans increased by 57.5 percent, while the incomes of the bottom 99 percent increased by only 5.8 percent…” An increase in the minimum wage would help lessen the effects of the wage gap and allow for more equality within the United States. If we do not increase the minimum wage, then what it is we can do to create equality within capitalist America?
http://www.huffingtonpost.com/peter-dreier/raising-the-minimum-wage-_b_2750336.html
I admire President Obama for his commitment to low-wage earners and his proposal to help them out by increasing the minimum wage to $9.00. However, I do not think that raising the minimum wage will provide the significant help to those under or at the poverty line, especially three-people families consisting of a single parent with two children, which it intends to. Rather, a raise of the minimum wage to $9.00 would still not be enough for such families, according to FamiliesUSA. Not to mention, raising the minimum wage would be redundant due to the fact that the Earned Income Tax Credit already provides a boost in salaries for low-wage workers and is said to be more efficient that raising wages earned (Op-Ed). Lastly, many employees working at the minimum wage are teenagers, not single parents trying to raise a family. These teenagers would certainly appreciate the increase in their wages, but with the EITC already in effect, there is not much of a point in attempting to help out single-parent incomes. I believe that President Obama should instead shift his focus from minimum wage to increasing the support for the EITC, a tax credit supported by both parties, in order to help those at or below the poverty line.
Increasing the minimum wage will benefit society as a whole. Many argue that if minimum wage is increased that employers will fire workers in order to offset the cost of the high wages. This theory however is false. The demand for workers by the employers will not change because the same amount of work will still need to be done. If the job takes five workers the company will still need to higher and keep five workers in order to make sure the job is done. Increasing minimum wage puts more money in the hands of poorer people. Poor people are more likely to immediately spend the money, putting it back into the economy. More money circulating in the economy allows for more goods and services to be demanded by costumers. More goods and services means more workers for those jobs and the small amount of backlash from the increase in minimum wage will level out and if not the same amount, then more workers will be added to the workforce. The Economic Policy Institute did a study on effects of minimum wage increase. They state that a fallacy lies in believing that each increase of minimum wage will cause unemployment rates to rise because it is not economically efficient for employers, “By paying lower wages, employers may cause higher turnover and incur higher costs to recruit, train, and supervise their workers.” Over the long run, raising the minimum wage will not have a adverse effect on unemployment rates.
http://www.epi.org/publication/briefingpapers_bp150/
Even if the minimum wage was to rise to, as stated in the blog and shown in Families USA 2013 Federal Poverty Guidelines, $9.00 an hour it would still be below the poverty level for a family of three. The main push behind raising the minimum wage is to help give these families of three more money and raise their annual income to approximately $18,000 a year. If this rise in minimum wage still does not put them above the poverty threshold then the implementation of a higher minimum wage is uncalled for. Furthermore if it did rise to $9.00 an hour according to David Neumark and William Wascher in The Economist’s 2013 article Trickle-up economics “a higher minimum wage costs some low-skilled workers their jobs”. Carrying out the bill for a rise in minimum wage would put teenagers and other low-skilled workers out of work therefore raising the unemployment rate. To further strengthen this point the Bureau of Labor Statistics’ 2011 report stated people 25 years or younger made up about half of those making minimum wage or less. Most people under the age of 25 also are not going to be in a family of three. So what sense does it make to raise the minimum wage so families of three can earn $18,000 when that does not put them above the poverty threshold, it puts more low-skilled workers out of employment, and half of the people earning minimum wage are high school and college age students?
In President Obama’s 2013 State of the Union address, he discussed the possibility of raising the current minimum wage of $7.25 to $9.00. While this might sound good for the newspapers and help his public approval rating, it isn’t a very wise idea when thinking about the big picture of the economy. Let’s take money out of the picture for a minute and strictly speak about a healthy economy from a labor standpoint. Money only ensures that we work, so an economy should be thought about from a labor standpoint. In a healthy economy, almost everyone is working. The natural rate of unemployment is around 5% and the highest number of workers that the economy will allow. The current unemployment rate is at about 8%, which isn’t too high, but it will go back up if the minimum wage goes up. If the minimum wage increases, the same amount of money will be spent by the owners of firms on employment, but the unemployment rate will actually increase because of the firm’s inability to pay as many workers. This will result in lower economic productivity and a worse economy in general. Some people will be better off, but the economy as a whole will not be better off. It is possible that certain firms could even go out of business because of not being able to have enough labor at the higher required price. In fact, one could argue that the minimum wage should be eliminated entirely for an ideal economy. The wages of low-skill workers would go down, and so would the unemployment rate. The lower wages would also make college more appealing for young citizens, as they wouldn’t want to put up with receiving the lower wages. We would have more high-skilled workers, and that would help a lot with the accomplishment of harder tasks in harder careers. It is also good because there is a high demand for low-skill jobs, such as fast food and other minimum wage jobs, and not as much for the more difficult, important jobs.
At first glance, increased minimum wage is a daunting concept but I believe it will have less effect on employers than many think. Higher wages do raise labor costs, which would lead us to believe employment would decrease. However, higher wages would motivate employees to work overtime, fill shifts, and ultimately work at a higher level of output regardless of weather the employee experienced the previous wage rates or not. As the demand for minimum wage jobs increases, employers would have a larger pool of potential employees to choose from allowing them to select more skilled and qualified workers. This would allow businesses to compensate for the production of less skilled workers, usually teenagers that had to be laid off. San Francisco, a city that holds the highest Minimum wage rate in the nation (10.55) has seen little effect on employers. UC Berkeley study found that the rising minimum wage had no impact on jobs or the propensity of employers to leave the area. While retail stores may be affected more severely, local restaurants simply passed on increased costs to customers.
http://www.sfexaminer.com/local/2012/12/san-francisco-s-minimum-wage-will-rise-again-1055#ixzz2MM1e18Dc