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"Maximum Wage For Minimum Benefits" Essay

2344 words - 10 pages

Whether it be a high school student trying to earn some extra cash or a single mother trying to provide for her family; many Americans have worked a minimum wage job at one time or another. Minimum wage is the lowest amount of money a company can pay for an hourly employee in most cases. The first federal minimum wage in the United States was established in 1938 at 25 cents an hour. Since 1938 the federal minimum wage has increased to $7.25 an hour, and in the state of Minnesota, has increased to 9 dollars an hour. What will these changes bring to the state of Minnesota? Those who now work minimum wage will surely see an increase in income and a higher standard of living. What about those ...view middle of the document...

What then does the minimum wage do to those who are truly in poverty and don’t work a minimum wage job due to current unemployment? Roger LeRoy Miller, economist, and author of “Economics Today: The Micro View” states that while the minimum wage makes those currently employed better wages it causes unemployment and can make those unemployed much worse off (86). So the majority of those that this proposed increase would help are young adults and teens not currently in poverty. In fact those in poverty would find it much harder to find work. This is due to the much higher costs of labor for business owners and employers.
Though some people think that increasing the minimum wage by too much is problematic, they offer a solution of increasing the minimum wage by the same rate as rate inflation raises. According to Scott Horsley in an NPR interview thought this about the proportional increase, “This would give employers predictability, which is something business people always say they're interested in. So they think that this could actually lead to a smaller decrease in the number of jobs”. Though this would be true in the sense that employers could have some insight as to how much they would have to increase wages, this could ultimately lead to higher job loss. Just because these employers have insight as to how much their employee’s wages would raise doesn’t mean this would allow them to keep all of their employees. Employers may see that in the next couple years labor will be very expensive and refuse to hire any help until the price of labor decreases. Another question to ask when dealing with proportional wage increase is “What happens when inflation goes down?” If inflation were to go down would employees receive a pay cut? It may seem unfair in the employee’s eyes but to the employer, why not cut wages when inflation goes down when they need to increase wages when inflation goes up?
Historically, every increase in minimum wage has led to an increase in the unemployment rate. According to Miller, in May of 2007 a proposal to increase the minimum wage was made. It would increase incrementally over the course of three years from $5.15 to $7.25 by 2009. The unemployment rate during these years increase from 5.4 percent to over 10 by the time minimum wage was at $7.25 (87). This change is no different. In a study conducted by the Congressional Budget Office, “an estimated 500,000 jobs will be lost due to this new increase in minimum wage.” This loss of jobs is due to higher cost of labor. Employers will be less likely to higher more labor when that labor cost a lot more money. Many business, large or small, have a budget that is directly associated with labor and costs of labor. An increase in the price of labor does not change that business’ budget, but only limits the number of workers that firm is willing to hire. This forces the employers to look for more skilled labor, in order to prevent unskilled labor from costing the company more money...

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