LITERATURE REVIEW
Literature in the past shows that the effect of a higher minimum wage will increase poverty. Raising the minimum wage will significantly influence poverty, especially in countries that are undeveloped. As stated in (Gindling,2014), raising the minimum wage will benefit some people, but it will hurt others. The impact of the minimum wage increase relies on the wage distribution, and employment. Lastly, the literature points out that increasing minimum the wage plays a small role in alleviating poverty, thus, it cannot be the only way to lessen poverty. The literature attempts to understand the influence the minimum wage has on poverty for the formal sector and informal sector for ten states in the United States.
One issue with increasing minimum wage that economist believe is that higher minimum wages increase poverty in the United States.
According to Card and Krueger(2015), the informal sector will not adequately satisfy minimum wages for people in the workforce.
A minimum wage increase does not cover workers. The impact of not being covered mostly affects poor families who are not covered by statutory minimum wage.
Predominantly dominate the informal sector and if laws are available they are poorly enforced.
Card and Krueger (2015) argue that increasing minimum wage may lead to workers being laid off by employers to cut the wage bill.
After being laid off, workers in low-income families discovered that their poverty state became temporarily
To begin, there is an extensive debate over whether if the U.S were to raise minimum wage, could it really help the working poor of low income families. Nancy Cook, in her article from the National Journal, “Why a Minimum-Wage Hike Can’t Help the Poor”, she points out that two thirds of around 100 surveys from 2007 had a negative effect and that it does more for the middle class than the lower one. (p.14). So, therefore, from her
It can also be argued that raising the minimum wage would inadvertently have a negative effect on the economy and actually increase poverty. If the minimum wage were to increase from $7.25 to $10.10, the result would be the loss of 500,000 jobs, as predicted by the Congressional Budget Office (Should the Federal). 54% of employers stated that they would lower hiring levels and 38% stated that they
Millions of Americans live in poverty unable to find high paying jobs to support themselves and their families. A common belief is that paying a higher minimum wage would help lift people out of poverty by giving those with low paying jobs a higher income, however the evidence suggests otherwise. The 2016 race to the White House heating up, the minimum wage battle is at the forefront of every economic discussion. The rhetoric between candidates within and across party lines is intensifying. Many differing opinions are being heard. As the debate over whether or not to raise the federal minimum wage from $7.25/hour to $15/hour rages on, one side stands apart time and time again.
In the United States alone, the amount of people in poverty is 14.5%. That equates to 45.3 million people in 2013. In a country like America, one of the world’s superpowers, it’s embarrassing to admit. But the main issue is to fix issues like these with the minimum wage and welfare. The minimum wage applies to workers who got a job whether because they were in school or because they had not gone to college and had no other option. Most of the country lives off as minimum wage workers as only 1% of the world’s population has a college degree. Minimum wage needs to be adjusted to modern inflation. But the minimum wage allegedly does not affect poverty at all says a large demographic and does not need to be adjusted. The minimum wage makes up a lot of the country and should be adjusted or modified to today’s standard of living.
The main problem with raising the minimum wage would be the increase the population of Americans that are unemployed. A higher minimum wage
Raising the minimum wage has multiple benefits. As an increase to minimum wage moves families above the poverty threshold, their need for public assistance decreases. As wages increase, a family’s purchasing power increases for
The raise to minimum has the potential to cut the employment by 500,000. ( Trugman, Jonathan M. ) Raising minimum wage reduces many employment opportunities and raises the prices. This gives employers and firms and incentive to use less labor. ( Dunkelberg, William. ) Hikes in minimum wage will cause employers to largely scale back on hiring. Instead steering towards automation and foreign outsourcing. ( Trumbull, Mark. ) If employers switch to automation and foreign outsourcing it will be difficult for lower skilled workers to find good jobs. ( Dunkelberg, William. ) Raising minimum wage has many negative outcomes for employers and
Many argue that raising the minimum wage makes hiring workers more expensive, eliminates jobs at the bottom, slows growth and ultimately raises unemployment. Economic studies show that raising the minimum wage to keep pace with inflation creates little additional harm, but what the president is
In the United States the time has come for the next president to be elected and the political fervor has come early this year with an unconventional, surprisingly interesting primary race. With the coming of a new commander in chief the incessant grilling of the candidates has begun and issues, such as poverty in the United States, are being given the national spot light during debates. The issue of poverty has recently gained traction among citizens as well as politicians, and to the credit of the activists behind the increase in outspoken rhetoric gaining increased traction. When each of the politicians on their respective stages discussed the issue at hand, the validity of the problem heightened. This has created minimum wage as its own political issue, which has moved it away from being a suggestion for a problem into a problem of its own. Minimum wage is a flawed approach to the ever expanding problem of poverty. Actions will be taken to battle poverty, however, minimum wage is not the best direction for America to proceed in. A higher minimum wage does more harm than good, hurting the American economy, increasing the price of needed goods, and raising unemployment.
The current U.S. Federal Minimum Wage is $7.25 per hour. In just two years from 2013, the demanded from advocates for raising minimum wage rose from $9 to $15. However, raising the minimum wage is more complex than simply raising the number of federal standard of pay for employees. Relative control groups and other market activities play a part in the outcome of the minimum wage. For example, one instance of market activity was observers said that raising the minimum wage did not hurt individuals; however, wages were raised during an economic downturn so the impact of minimum wage was masked by other activities. Federal Minimum Wage is pressing topic and it is important to consider the pros and cons to raising it, to ask what people and how people are affected, and to look further into the microeconomic theoretical framework of wages surrounding the topic.
Also it will increase the poverty rates example “Evidence suggests that minimum wage increases don’t reduce poverty. In the previous federal minimum wage increase from $5.15 to $7.25, only 15
Raising the minimum wage can hurt many people in different aspects of business. Increasing the minimum wage will cause businesses to lay off employees. Matt Zwolinski stated “By increasing the cost of labor, they reduce the demand for it” (3). This essentially means that those who are increasing the minimum wage are also creating unemployment. The increase in lay offs causes the unemployment rate to skyrocket (“Should” 1). Joseph Sabia and Richard Burkhauser estimated that about 1.3 million jobs would be eliminated if the federal minimum wage was increased to $9.50 per hour (“Four” 1). Raising the minimum wage would cause many small, local shops to close their doors. Even many big fast food companies would have to close their doors because they would not be able to pay their employees (“Should” 2). Seattle, being the first US city to raise the minimum wage, has received a lot of attention. A study found that there were many jobs lost due to this wage
Low minimum wages affects everyday families and lives, more than the average person would think. A small minimum wage could have an very small effect on someone’s life, such as not being able to afford a new pair of boots or that new phone, contradictory to this low wages could also have a very serious effect on someone’s life . Meaning that a parent or single individual could not support their family because a lack of income, it could also mean the difference of living under a safe roof, or living in the streets. In 2016 alone, 40.6 million people in the United States
The increase in minimum wages can affect not only the workers at the minimum wage but also workers who earn higher hourly wages.
As stated by Ramirez, et al., “...there is no statistical significance between minimum wage and poverty rate.” From an international standpoint, Gindling also repeats this in terms of developing countries using similar reasoning. Poverty, however, while still a major issue within the United States, may be easier to fight here due to the laws keeping most people non-exempt from the minimum wage. Additionally, poverty is not the main target of a minimum wage increase; rather, a minimum wage increase allows for upward mobility among those who are struggling now, which over generations can resolve poverty.