Minimum Wage Essay

This article goes into detail on the effects of minimum wage on employment and businesses. In the article it gives facts on how business are willing to increase pay because the employee productivity will increase. The article also talks about how the business will yield more products making the company more money, with an end result being able to raise their minimum wage.

Ira Knight, who is an author of article “Let’s Make the Minimum Wage a Living Wage”, expresses an opinion that increasing the minimum wage would help all struggling workers and at the same time improve U.S economy. On the other side, Janice Steele in her article “Keep the Minimum Wage Where It Is” argues that raising the minimum wage would have bad effects on workers, consumers and small businesses. Ira Knight’s article seems to be the stronger of the two positions because her arguments are based on several recent studies, and last but not least, she had a personal experience with the minimum wage job.

The issue of the minimum wage has recently come to the forefront of the debate on social policy. There is much disagreement over the wisdom of an increase in the minimum wage in the current fragile economic recovery. Some argue that a dramatic increase is what is needed in order to lift the standard of living for those in the bottom of the economic pyramid. Economists reason that the basic principle of supply and demand mandates than an increase in the wage would result in the loss of available jobs. Small businesses maintain that it would spell their doom.

One source from the Opposing Viewpoints Database called, “Raising Minimum Wage Increases Unemployment” argues against the minimum wage by suggesting it will decrease financial security and cause higher unemployment rates. The author provides unemployment statistics from the 1990s onward as evidence to argue against the minimum wage. The article says, “In 1990, Congress enacted another minimum wage increase.” “The month before the increase took effect, unemployment was 5.2%.” “With the increase, unemployment began to steadily increase and unemployment eventually peaked at 7.8%” (Jaarda). The article emphasizes to readers that increases in minimum wages and following increases in unemployment are not just coincidences by continuingly pointing at similar statistics throughout history.

An increase in the minimum wage would push companies to take this route as it becomes more and more profitable to them. The end result of all of this would be a suddenly increased level of unemployment bound to become subsequent with an increase in government-funded welfare expenses, weakening the economy even more.

To analyse and draw conclusions on minimum wage in relation to its standing in business law, we first of all need to define what the meaning of the term is. National minimum wage was introduced in 1998 through the national minimum wage act. This enforced that employers would pay each employee a set value set by the government per working hour. One of the main benefits of this was that the most low skills jobs within society received a fair wage. Setting the price of minimum wage is a complex task as the main priority is to reduce the negative effect on the labour market, creating benefits outweighing the costs. Inflation and minimum wage have a very close relationship, with inflation being the annual increase in the price of goods and services. As inflation rises, it is natural for minimum wage to follow at a similar rate. In october 2014, minimum wage increased 3%, whereas inflation increased 2%. This shows an improvement in the real term income for over 1,000,000 of the lowest paid workers in Britain.

For over a decade, many Americans have struggled with the low wage issued from employers, despite working very long hours of work. According to a study done in Oregon State University, a federal minimum wage was first set in 1938, starting at 25 cents an hour. Due to inflation that has occurred many times throughout the century, the call for raising minimum wage is to be immediately answered. However, the minimum wage falls when congress does not raise the minimum wage to keep up with inflation. Because of this many cities and states have departed from the minimum wage. In this essay, to be discussed is the reason why imposing a minimum wage above the equilibrium wage will reduce employment and contribute to an increase in the unemployment rate.

Specific data from each state were examined to find if it would better for the federal government to impose an overall minimum wage policy for the entire country or should each state establish its own minimum wage policies. This quantitative study used a poll statistical analysis to measure which U.S. working class supports an increase in the minimum wage. Additional, their data from the Bureau of Labor Statistics (BLS) estimates that out of the 146 million workers in the U.S., about 16% earns $10.10 or per hour. Roughly about 20% of the working population in at least 15 states earns less than $10.10 per hour. The findings portray that an increase in the minimum wage, will have a slightly higher negative impact on low income wage workers, than the normal estimated job losses. While not everyone earning equal to or less than $10.10 per hour will lose their jobs, the number of job loss is significant in some states; some more than others will be hit hard with unemployment. The article addresses that there is a problem with the minimum wage not being regulated more often, and that each state should adopt their own policies to set the income limits. Therefore, the authors made a compelling case that each state should develop its own wage

Ever since the earliest implication of a minimum wage, indications of job losses have been occurring. “Minimum wage increases recently imposed in American Samoa resulted in economic effects so pronounced that President Obama signed into law a bill postponing them” (CATO, 1). In 2006, over one hundred minimum wage studies were conducted by David Neumark and William Wascher discovered that an increase in minimum wage resulted in negative effects

Another common argument made by those in favor of the minimum wage is that it actually helps to stimulate spending, improving overall economic conditions.[vii] The theory behind this argument is that low wage earners typically spend everything they make. Whether on necessities or luxury items, minimum wage earners are likely to spend their entire paycheck. If there were an increase in the minimum wage, the people who would receive the pay increase would turn around and spend their new money. This would help to cover the costs of the increased wages as many businesses would see an almost immediate return through increased sales. While this argument seems to make sense, it must be clarified that no empirical evidence to support this claim could be found.

Proponents of raising the minimum wage claim that if the minimum wage was raised, then many economic and social problems would be alleviated. This contention is at odds both with economic principles and years of creditable research. The effect of raising or even having a minimum wage has been studied extensively and the majority of studies have proven that raising a minimum wage does not have the desired effect. Both micro and macroeconomic forces affect the results of raising the minimum wage. The secondary effects of raising the minimum wage are bad both for

Low-skilled workers struggle with unemployment and poverty when a minimum wage hike hits, but in their mind they think they are just making more money. In 1981 the commission wrote an analysis over the job loss effects (Kosters 1). It proved that more job loss occurred when the minimum wage rose. A minimum wage hike is the worst way to get the lower class out of poverty (Sabia 2). The higher the prices are then the harder it

Minimum wage is the lowest or minimum compensation for workers by their employers. As such, it has a noticeable impact on the economy through various channels including standard of living, business efficiency, wage and income inequality, etc. Although minimum wage has many positive effects such as increasing the standard of living as well as reducing inequality, there are also many drawbacks to having a minimum wage such as inflation and unemployment. This paper will attempt to determine the influence of having a regulated minimum wage has on the economy.

In a paper titled “Four Reasons Not to Increase the Minimum Wage,” the Cato Institute, a libertarian think tank, offers four empirically backed consequences of increasing the minimum wage; these consequences include: the loss of jobs, low skilled workers being disproportionally affected and priced out of the job market, a minimal effect on reducing poverty, and higher prices for goods. The paper compiles a number of studies to support these

The issue of whether to raise the minimum wages across the United States has for years divided economists, politicians and academicians alike. The first national minimum wage laws in the US were established with the passing of the 1938 Fair Labor Standards Act during the Great Depression at the rate of $0.25 per hour. Currently, the federal minimum wage stands at $7.25 per hour while many states and localities such as the city of Seattle have raised minimum wages significantly above the national rate (Hoffman, 2014). However, for working people today, pay for work has declined in value when adjusted for inflation from what it was at the beginning – pay rates have fallen along with fewer quality