The definition of Minimum Wage is “an amount of money that is the least amount of money per hour that workers must be paid according to the law” (Minimum wage). Minimum wage, like other laws, are used to keep the economy in line. Minimum wage laws were invented in Australia and New Zealand with the purpose of guaranteeing a minimum standard of living for unskilled workers. (Linda Gorman) Minimum wage puts a price on the services one offers. Many different principles can be used to explain Minimum wage and explore the different aspects of it. Including what minimum wage does for our economy and the current status of it.
2. History of Minimum Wage
According to Principles of Macroeconomics by Gregory Mankiw, “The U.S. Congress first instituted a minimum wage with the Fair Labor Standards Act of 1938” (Mankiw 4-119). Minimum wage is used to set a limit of pay employers must pay their employees. Through the years the minimum wage has raised as productivity has raised. The minimum wage has constantly fluctuated and changed multiple times.
Congress created minimum wage with the Fair Labor Standards Act of 1938. The first minimum wage was only 25 centers per hour. Through history the minimum wage has increased a little at a time, umping a couple cents each time. The last time the United States changed the minimum wage was in 2007 which was a large jump from $5.15 per hour to $7.25 per hour. This jump of $2.10 was a large increase. Through the years it is evident that the minimum wage is constantly changing. “. It has averaged $6.60 an hour in purchasing power in 2013 dollars. But it has ranged from a low of $3.09 an hour in late 1948 to a high of $8.67 an hour in 1968(Sherk, J. (2013, June 25).
Currently now there is a debate to raise the minimum wage to $10.10 an hour. This has been publicly debated and President Obama has stated he supports it. This would be a large jump from the minimum wage of $7.40 an hour we currently have now. Those that support it say it will jump the economy and get people out of poverty. Those that are opposed to it say that it will only cause a jump in prices and cause more unemployment.
3. Two sides of Minimum Wage
When many Americans look at a raise in minimum wage they see more money. How could raising the minimum wage not be a good thing? Minimum wage forces businesses to pay their employees more but it doesn’t force them to keep their employees. When the government purposes minimum wage it is said that it will help the poor, unskilled and younger workers in the economy. Yet when minimum wage is in effect people end up losing their jobs. Employment happens because someone decides to offer their services for a fee. As an employer, they look to find an employee that’s value exceeds their fee. Now when the minimum wage is raised, their fee now exceeds their value. Which causes the employer to let go of those employees that now cause them a financial cost. This is why minimum wage causes unemployment and hurts more than...