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The Economic Impact Of Raising The Minimum Wage

1895 words - 8 pages

“Franklin Roosevelt’s 1937 impassioned speech calling on Congress to help the one-third of Americans who were “ill-housed, ill-clad, and ill-nourished” heralded in the Fair Labor Standards Act of 1938 and with it a national minimum wage. Echoes of that speech are still heard today. Senator Edward Kennedy (1989: S14707), in his criticism of the most recent increases in the minimum wage, declared:
The minimum wage was, as it should be, a living wage, for working men and women ... who are attempting to provide for their families, feed and clothe their children, heat their homes, [and] pay their mortgages. The cost-of-living inflation adjustment since 1981 would put the minimum wage at $4.79 today, instead of the $4.25 it will reach on April 1, 1991. That is a measure of how far we have failed the test of fairness to the working poor.” (Burkhauser 1)
The United States minimum wage is not indexed to inflation. Due to this fact, the purchasing power of minimum wage falls as the price of consumer goods increases. The current hourly minimum wage is set at $7.25, however many states do pay above this rate. One example of this is in Michigan, the current hourly minimum wage is $7.40. The last time a change occurred to raise minimum wage was in 2009. President Obama has put out a proposal that is designed to raise the federally required hourly minimum wage to $10.10 in 2015. The public opinion of this proposal is all over the board ranging from a positive outlook to a negative one. Some of the negative remarks are that it would dampen the economy and shrink the hiring done by small businesses. “The Household Survival Budget for the average New Jersey family of four is $58,500 and for a single adult is $25,368 in 2010. These numbers highlight how inadequate the U.S. poverty designation - $22,113 for a family and $11,344 for a single adult - is as a measure of economic viability. A Sustainable Household Budget, one that enables self-sufficiency in New Jersey, is almost double the cost of the Household Survival Budget.” (Alice 9) This survival budget includes rented efficiency apartment, thrifty food plan, public transportation, and nominal out of pocket expenses for health care. A sustainable budget is 84% higher in costs. (Alice 9) The figure below, Figure 1, shows the budget being mentioned in this article. If a person is working 40 hours a week at the federally required minimum wage of $7.25 an hour, then their yearly income would be $15,080. This income places a person above the United States poverty line, but extremely below the Survival Budget mentioned previously. If the minimum wage was raised to $10.10 an hour then their yearly income would increase to $21,008. That is only about $4,000 away from the Survival Budget income level. While there are several viewpoints regarding the negative impact of raising the United Stated minimum wage, an analysis of the actual data does not support such viewpoints.
One of the main concerns of the people for a...

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