One of the most frequently asked questions in our country
seem to be whether or not minimum wage be raised. The statutory federal minimum
wage can be defined as the lowest wage that employers may legally pay to their
employees. Much of the debate over this policy centers on whether raising the
minimum wage would be a great way to alleviate poverty and economic crisis, but
the overwhelming body of evidence suggests that increasing the minimum wage
would do little to reduce poverty. On the other hand, it would almost certainly
reduce employment opportunities, especially for those low skilled, teenagers
and young adults. One can say that minimum wage should not be increased because
it increases poverty, raise unemployment rate, and reduces the likelihood of upward
The first national minimum wage laws in the United States
were passed as part of the 1938 Fair Labor Standards Act, during the Great
Depression under President Franklin Delano Roosevelt. The purpose of the
minimum wage was to stabilize the post-depression economy and protect the
health and well-being of the workers in the labor force. The minimum wage was
initially set at $0.25 per hour. Since 1938, there has been many amendments to
the Fair Labor Standards Act that helped established many laws such as the
rules about vacation time, what kind of companies and types of work must abide
by these rules, and increase the national minimum wage multiple times. The
first big raise in the minimum wage was from $4.25 up to $5.15. This amendment
was passed by the Clinton Administration in 1996 and was surrounded by
controversy, just as there is now in the current push to again increase the
minimum wage. The Fair Minimum Wage Act of 2007 is a legislation to amended the
Fair Labor Standards Act of 1938 which will gradually raise the federal minimum
wage from $5.15 per hour to $7.25 per hour. The
act raises the federal minimum wage in 3 increments: “$5.85
an hour, beginning on the 60th day after enactment of this Act; $6.55 an hour,
beginning 12 months after that 60th day; and $7.25 an hour, beginning 24 months
after that 60th day” (Miller). There was much talk in the media about what effects this increase in
the minimum wage will have on the economy and on the low income workers in America.
In addition to the federal minimum wage set in 1938, many states have
passed their own minimum
wage legislation. Some of the states even had legislation before the Fair Labor
Standards Act of 1938. There are many states and local governments that have established
higher minimum wages for American workers. Each state has their own minimum wage laws in place. “In Mar. 2016, 45
states plus DC had their own minimum wage laws in place. The lowest federal
minimum wage being $7.25 an hour and the highest being $10.50 an hour (“background”).
There are at least 30 cities and counties that have adopted legislation
enforcing a higher minimum wage than their respective state levels.
People who earn minimum wage are
usually young. According to the US Department of Labor’s Bureau of Labor
Statistics (BLS), About 77.2 million people ages sixteen
and over worked for hourly wages in 2014. In 2015, there are about 2,561,000 workers, or 3.3% of the hourly paid
working population age 16 and over earned at or below the federal minimum wage
of $7.25 an hour. While workers under age twenty-five
made up only one-fifth of all hourly workers in 2014, about half of them earned
minimum wage or less. Single
parents and their families are the ones that rely the most on minimum wage. Every
penny makes a difference for low-wage
workers because they need the money to
put up food on the table, pay up
and buy clothes
for their children (“Minimum”).
Minimum wage should increase
because it would increase economic activity and stimulate job growth. The
Economic Policy Institute stated that a minimum wage increase from the current
rate of $7.25 an hour to $10.10 would inject $22.1 billion net into the economy
and create about 85,000 new jobs over a three-year phase-in period (“Raising”).
Raising the federal minimum wage to $10.10 by 2016 would lift incomes for
millions of American workers and provide a modest boost to U.S. GDP, which is
one of the primary indicators used to gauge the health of a country’s economy.
It gives more people the opportunity to find a job and support for their
family. Higher minimum wages could stimulate the economy and boost wages, for
example employers focus on high-skilled workers in the short term, that would
help to boost productivity and the economy in the long term, eventually
providing jobs for the low skilled. A higher
minimum wages would also redistribute productivity from low-skilled to
high-skilled jobs. According to Robert Gordon’s monumental economic
history, there was a great leap forward in productivity growth during the Great
Depression. The minimum wage was first
introduced during the Great Depression, which was a huge factor in the increase
in productivity growth (Employment). If low-income workers earned more
money, their dependence on, and eligibility for, government benefits would
decrease. This would decrease the amount of assistance that the government
offer in order to help provide for the poor. Consumer
spending is very
important to the recovery from the current economic crisis. It’s necessary to increase the minimum wage
because consumer purchasing depends on the amount of money that they have, so
the more they have the more they would spend. (Sklar). Increasing the minimum wage would act as a great economic simulator and
giving more people an opportunity to find job. It would also help with economic
activity and recovering from economic crisis.
minimum wage would help to reduce poverty. A growing share of workers make too
little to buy necessities. More and more two-paycheck households struggle to
afford food, fuel, housing, health care and other necessities, but minimum wage raises
are a well-targeted stimulus because they go directly to those who most need to
spend additional dollars to provide
for their family. There have been Massive shift in income from the
bottom and middle to the top class. “By 2006, the richest 1% of Americans had
increased their share of the nation’s income to the second-highest level on
record” (Sklar). The minimum wage should increase to narrow the gap between the
rich and the poor. The current minimum wage is not high enough to allow people
to afford housing. According to a 2015 report from the National Low Income
Housing Coalition, a worker must earn at least $15.50 an hour (over twice the
federal minimum wage) to be able to afford to rent a “modest”
one-bedroom apartment, and $19.35 for a two-bedroom unit. The report stated:
“In no state can an individual working a typical 40-hour work week at the
federal minimum wage afford a one- or two-bedroom apartment for his or her
family” (Swason). Increasing the minimum wage would barely give the
workers enough money to afford housing. They would need additional money to
help buy the necessities for everyday life. Increasing the minimum wage would provide
the poor with the money that they need to afford housing and everyday
Increasing the minimum wage would
help to reduce crime rate. Higher wages for low-skilled workers reduce both
property and violent crime, as well as crime among adolescents. Study have
shown that Raising
the minimum wage reduces crime by 3 to 5 percent. A report from The Council of Economic Advisers state that there would
estimate 10 to 20 percent reduction in crime action for non-college educated
men when minimum wage increased. The report also found that increasing the
minimum wage to $12 by 2020 would result in a 3% to 5% decline in crime,
amounting to between 250,000 to 510,000 fewer crime and a “societal
benefit” of $8 to $17 billion. Higher wages for low-income individuals
reduce crime by providing viable and sustainable employment. This would
significantly reduce murders, robbery, burglary, larceny, and MVT motor
vehicle theft rates (“reduce crime”). Increasing the minimum wage would
provide the poor with the money which they need to feed themselves and their
family, so they would not need to commit crime in order to survive.
Even though increasing minimum
wage will help increase economic activity and spur job growth, help reduce
poverty, and also help reduce crime rates; however, increasing the minimum wage
will lead to an increase in poverty, and reduces social mobility and increases
Minimum wage should not increase because it will lead to an increase in
poverty. According to an article written by the Federal Reserve Bank of Chicago
in 2013, if the minimum wage is increased, fast-food restaurants would pass on
almost 100% of their increased labor costs on to consumers by increasing the
price (“How”). A 2015 Purdue University study found that
raising wages to $15 an hour for limited-service restaurant employees would
lead to an estimated 4.3 percent increase in prices. If the minimum were
increased to $22 per hour, it would cause a higher increase of price at 22% or
a reduction in product size between 12% to 70% (Purdue). Minimum wage increase
do little to help redistribute wealth among the rich and poor. Most minimum
wage employees work for small businesses. Their profit margins are too small to
absorb large wage increases. These small businesses can only afford higher
wages by passing the minimum wage
costs on to their customers with a increase
in prices. The customers are ones that bear the burden.
not the business owners. Accounting for higher prices shows that minimum wage
increases would only transfer few resources to low income families.The burden
of these price increases falls disproportionately on low-income and
middle-income Americans. This would eventually increase anti-poverty effects
because everyone in society, not just business owners, pays the costs through
higher prices. Consequently, minimum wages raise prices more on the poor
because they are the one that spend more money on the products. Overall,
minimum-wage increases provide little net benefit to the poor; in fact, more
low income families lose than gain. Minimum-wage increases do not accomplish
what their supporters claim they will (Sherk).
Minimum wage should not increase because it would reduce the likelihood
of upward mobility. Most people
affected by the minimum wage are actually young workers. Individuals between
the ages of 16 and 24 accounted for 53 percent of all minimum wage earners. When the minimum wage rises, it
increases the incomes of teenagers with minimum-wage jobs, making entering the
workforce more attractive. The attraction to higher wages from minimum wage
legislation reduces high school completion rates for some students with limited
skills, who are then disadvantaged with lower wages and career opportunities
over the long run if they never finish high school. Mark J. Perry, PhD, of the
American Enterprise Institute states that the attraction to higher wages from
minimum wage legislation will reduce high school completion rates for some
students with limited skills. This will cause some students to spend less time
in school and more time at work. According to a 2003 study by economists David Neumark, PhD, and William
Wascher, PhD, a 10% increase in the minimum wage
caused teenage school enrollment to drop by 2% in states where teens can leave school before 18 (Sherk).
The students are then disadvantaged with lower wages and career opportunities
over the long-run if they never finish high school (Perry). Raising the minimum wage will motivate teenagers to make choices that may push
them into poverty later in life. Workers need skills and education to get ahead in the economy, and
workers without a high school diploma face difficult career prospects (Sherk).
It will eventually reduce the likely hood of upward mobility in the society.
The teenagers will not have the motive to try harder in order to have better
life because it would give them a subconscious feeling that not going to school
will still allow them to make the money to support themselves.
Increase the minimum wage would cause a raise in unemployment rate. Raising
minimum wage hurt businesses and force companies to close, which will let go of
many thousands of workers. The Congressional Budget Office projected that a
minimum wage increase from $7.25 to $10.10 would result in a loss of 500,000
jobs. This would drastically decrease the hiring rate of many companies and
increase the skills or abilities that they look for in a employee. This would victimize the country’s lowest skilled workers and making it more
difficult to find employment for which they qualified. This would cause employers to eliminate
entry-level jobs, potential employees are denied the opportunity to gain work skills and
lose the ability to move up the economic ladder. According to James Dorn, PhD,
Senior Fellow at the Cato Institute, a 10% increase in the minimum wage will
lead to a 1 to 3 percent decrease in employment of low-skilled workers in the
short term, and to a larger decrease in the long run (Dorn). This will
negatively affect the low-skilled workers workers because their skills do not
exceed as the same level at a higher minimum wage. Those better-skilled and educated workers will out
compete unskilled workers for jobs.
Businesses would consider better educated, more skilled workers to earn the
wage. Teenagers and young adults might be shut out of workplace (“Effect”).According to a 2014 article written by Matthew Rousu, PhD, Associate
Professor of Economics at Susquehanna University, it states that the federal
minimum wage has a devastating impact on teenagers because firms will not pay
many young workers with no skills or experience minimum wage, let alone a
higher wage (Flow). This would give teenagers less of a chance to experience
the society at a early age. Those experiencing unemployment at an early age
will have years of lower earnings and an increased likelihood of unemployment
ahead of them. If the minimum wage is increased,
companies may consider using more robots
and automated processes to replace service employees. Companies
that cannot afford to pay a higher minimum wage for low-skilled
service employees will chose to
use automation to avoid hiring people in those positions altogether. Unskilled
worker may be replaced by robots and automated processes if minimum wage
continue to increase. This will hurt the poor drastically because they will not
be able to find work and provide their family with every day necessities.
There are alternatives to raising the minimum wage. One example would be
to encourage education not only among teenagers and adults but everyone. A
better education would allow the people to find a higher paying job and move up
in social mobility. With a combination of education, hard work and good
behavior it can help anyone to be at least reasonable success. Another example
would the guaranteed basic income program, a system where government provides
its citizens with an income, regardless of whether or not they work. This will
provide the poor with the money that they need to support their family and buy
everyday necessities. Lastly, the federal minimum wage should not increase
because it will lead to an increase in
poverty. Raising the minimum wage will also reduces the likelihood of moving up in social class and increase drop out rate of high school
student. Last of all, it will increases unemployment rates.
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