Minimum Wage In America Essay

694 words - 3 pages

Minimum Wage in America � PAGE �2�


Minimum Wage in America

Jeremy Masters

National University (ECO 203)

Minimum wage laws were first seen in Australia and New Zealand around 1896, they set the legal minimums for the hourly wages paid to certain groups of workers. These laws were first seen in the United States round 1938. As of today, more than 90% of all countries have some kind of minimum wage legislation. According to Wikipedia (2008), "minimum wage law is the law which prohibits employers from hiring employees or workers for less that a given hourly, daily or monthly minimum wage." As stated in Microeconomics, a minimum wage creates a price floor (Gwartney, Stroup, Sobel & Macpherson, 2008).

Most employees opportunities are unaffected by minimum wages in America, as they earn excess of these minimums. It is however, the under-skilled and inexperienced workers who are most affected (Gwartney et al., 2008). Many of America's youth have a need for these lower-skilled jobs in order to build on their work experience. This work experience helps individuals get a feel for professional working environments. To understand why minimum wages have such hazardous effects on the labor market, one must understand how wages are determined in the free market.

Consider, for example, the owner-operator of a local diner. To maintain a successful business, the owner has to make profits that provide enough support for his family. The local market dictates how much he can charge for his meals because people can choose to eat at other restaurants or dictates what he must pay for food, restaurant space, electricity, equipment, and other resources required to produce his meals. Although the restaurant owner has little control over either the prices he can charge for his meals or the prices that he must pay for the resources needed to produce them, he can control his costs by changing the combinations of the resources that he uses. He can, for example, hire a unskilled labor, for example a teenager, to wash and slice raw potatoes for fries, or he can purchase ready cut potatoes...

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