Minimum wage is the lowest rate employees may legally pay for an hour of labor (Merriam, 741). The United States has a minimum wage law to guarantee minimum hourly wages and to prevent the exploitation of workers and provide unskilled and part-time workers with a wage floor. People have argues that the minimum wage has become less of a safety net for primary earners in poor families than a floor for the wages of teenagers and other secondary earners from higher-income families.
In 1933, there were a long series of “Conferences on the Minimum Wage,” established by the Department of Labor. There were many minimum wage administrators and representatives of organizations with an interest in these programs. Some of these groups were: The National Consumers? League, the General Federation of Women?s Clubs, the National Women’s Trade Union League, the AFL, the National League of Women Voters, and the National Young Women?s Christian Association. The original bill that was written provided for 1. A five-member Fair Labor Standard Board, 2.
A minimum wage of not more than 80 cents an hour or $1,200 per year, 3. The general initiation of a 40 cents-an-hour, 40 hour workweek except in exceptional circumstances, 4. The prohibition of interstate shipment of goods produced with “oppressive child labor,” 5. The exception of agricultural workers and executives, administrative, supervisory and professional employees, and 6. Authorization of the Fair Labor Standard Board to appoint advisory committees to consider conditions in industries or occupations before establishing specific wage and hour standards (Ayres, Online).
On June 25, 1938, President Roosevelt signed into law the Fair Labor Standards Act, which established the national minimum wage at 25 cents an hour; it banned oppressive child labor and set the maximum workweek at 44 hours. Since then, Presidents Truman, Eisenhower, Kennedy, Johnson, Nixon, Carter, Bush, and Clinton have signed minimum wage increases into law.
When President Truman was in office, he signed the conference compromise bill, which about 1.5 million earners received wage increases of more than 5 cents an hour, when the amendment came into effect in January 1950. “The Act has proved to be wise and progressive remedial legislation for the welfare not only of our wage earners but of our whole economy,” President Truman observed while signing his statement (Ayres, online). On January 25, 1951, during the Korean War, United States wages and prices were frozen. This was the second debate of minimum wage legislation with a period of experimentation combined with an effort to regularize enforcement of the law.
There were more than 1.5 million workers in the lowest-paid jobs in retail trade, services, and agriculture and were provided with no protection by the Fair Labor Standard Act. When President John F. Kennedy was in office, he signed a bill into law that raised the minimum wage from $1 an hour to $1.25 and hour, in 1961. From 1960 to 1969, the number of wage and salary workers increased 29.3 percent and average weekly hours continued to decline from 38.6 hours per week in 1960 to 37.7 hours in 1969. In 1960, the total population was 180.7 million people, and 39.9 million people, 22.1 % were classified as poor (Ayres, online).
During the 1970’s and 1980’s, there was evidence that forged a strong tie between changes in the minimum wage and youth employment and unemployment. But according to data that was collected, the consequences of raising the minimum wage are certain, at best. By the 1980’s the minimum wage went up to $3.10 an hour and by the next year a raise in 25 cents brought the minimum wage to $3.35. By April of 1990, the rise in minimum wage went to $3.80 and then in 1991 it went to $4.25 (Ayres, online).
The minimum wage for this country is currently $5.15 an hour, which went into effect on September 1, 1997. The minimum wage needed to be increased because inflation was approaching a 40-year low. Inflation had largely wiped out the last increase in the minimum wage approved by Congress in 1989. In August of 1996, Congress passed and President Clinton signed a law for a two-step increase.
The first step lifted the minimum wage from $4.25 to $4.75 per hour, which was effective on October 1, 1996. The second step raised the minimum wage from $4.75 to $5.15 per hour, which has been effective since September 1, 1997. A full-time minimum wage workers will now make $10,300 a year, which is up $1,800 from the full-time annual earnings under the $4.25 an hour minimum wage, in effect from April 1991 to October 1996. There are many people that are paid minimum wages in this country.
More than 4.8 million people in 1994 worked for wages at or below $4.25 per hour. Of these, 1.4 million were teenagers and 3.4 million were adults. Corporate profits and earnings for the average worker are rising. According to Secretary of Labor Alexis M. Herman, “America’s robust economy has created more than 2 million jobs since October 1996. This minimum wage increase will help ensure that the lowest-paid Americans also share in this prosperity (OPA Press Release).”
There is a special minimum rate paid to a worker with a disability, which is called a commensurate wage rate. This is based on the worker?s individual productivity, no matter how limited, in proportion to the wage and productivity of experienced non-disabled workers. The non-disabled workers were performing essentially the same type, quality, and quantity of work in the geographic area from which the labor force of the community is drawn.
For example, if an experienced non disable worker makes boxes and can produce 40 boxes in an hour, but a worker with a disability can only produce 10 boxes in an hour; then the worker with a disability is considered 25% as productive as the experienced non disable worker. This person should receive at least 25% of the prevailing wage for such work. If the prevailing wage rate is determined to be $6.00 an hour, the worker with the disability employed under special certificate should receive at least 25% of the wage rate or $1.50 an hour for performing the box production work (Miller, online).
Wages based on a wage determination issued under SCA do not have to be increased unless the wage determination calls for a wage rate less than the new, increased statutory minimum wage. Commensurate wages rates must be based on a prevailing rate at least equal to the statutory minimum wage.
There are many benefits to minimum wage increases. One of the most important benefits accrues to the millions of families with workers who are paid the minimum wage. There have been studies done, that have found that the two-decade-old increase in the pay gap between high paid and low paid jobs ended in 1996 and 1997 after the mandated increases for the lowest-paid workers. Consumers of services would benefit because higher-paid workers are more likely to be more motivated and more experienced.
Higher paid workers are, also more likely to be covered by private health insurance, which would reduce the burden on public health facilities and hospital emergency rooms. According to Harry Holzer, who is the chief economist with the wage division of the U.S. Department of Labor disputes the notion that a modest increase in the minimum wage has a significant impact on either business profits or employment (Alpert, online). Because of the overall strength of our economy, which continued after the minimum wage was increased in 1997, is evidence of that.
There was a survey done of businesses about the minimum wage increase. About 89.4% of businesses that were surveyed, most of whom employed fewer than 100 workers, said that 50 cents increases in the minimum wage in 1996 and 1997 had no effect on their hiring (Alpert, online).
More than 85 percent of the American public, supports the rise in the minimum wage. Raising the minimum wage was a simple and fair way to make-work really pay off. The higher the minimum wage has not prevented jobs from growing, but most labor economists increasingly recognize that minimum wage laws have much less of an impact on employment than was thought to be a decade ago.
“You always have these folks crying poverty, but it?s a little hard to understand how you can have hotel operators in New Orleans, getting record high occupancy and big profit margins, saying they can’t afford a small increase in the minimum wage. We don’t think you can make a decent standard of living getting $5.15 an hour or anywhere near that,” said Louis Jamerson, the field director of the AFL-CIO?s Hospitality and Restaurant Organizing Council (Alpert, online).
Some business leaders say that an increase in the minimum wage will hurt those in the labor pool because with higher costs owners are likely to cut work hours or even eliminate jobs. “I employ mostly teenagers, and for them I’m giving then their first job experience, training them on showing up time, food safety, proper hygiene and things like that, which will help them down the road,” Pratt Landry, owner of Chelsey’s Frozen Custard in Harvey and Metairie explains (Alpert, online).
Some workers that regularly receive more than $30 a month in tips, can be paid as little as $2.13 an hour, under the minimum wage law. Lloyd Weber, senior vice president of the Louisiana Restaurant Association, has his own opinion on this minimum wage issue.
“It is a little bit upsetting that the part that claims it has a platform to support business would bow to this kind of pressure and think about increasing costs that make it so much more difficult for businesses to survive (Alpert, online).”
These are some high lights from the list the White House sent to reporters about minimum wage. 267,900 new jobs, or a growth of about 44,000 per year; the poverty rate has fallen about 10 percent” from 26.4 percent in 1993 to 16.3 percent in 1997. About 142,000 Louisiana residents got a raise when the minimum wage was bumped from $4.25 to $4.75 in 1996 and another 167,000 got a hike when it went to $5.15 an hour in 1997 (Alpert and Walsh, online).
Today the minimum wage, which corrected for inflation, is still thirty percent below its 1968 peak when the wage was closer to actually covering the costs of a family. Most United States employers used to expect to be able to provide full-time work and pay a wage that provided a subsistence budget for a family.
Some Democrats are backing a plan by Republican Jack Quinn of New York to increase the minimum wage by $1 over two years, with a 50 cent increase going into effect on September 1, 2000, and another 50 cent raise in 2001. The president is also proposing to increase the minimum wage over the next two years. This would provide for automatic increases in the minimum wage in the future? tied to the rate of inflation. Quinn says, “The working poor of this country deserves a fair increase in their paychecks to help feed their families and live with dignity (Alpert, online).”
Thomas Jefferson once said, “This increase in the minimum wage affirms our commitment to stand like a rock” for our working families and their right to jobs that provide fair compensation (OPA Press Release, online).
Example #2 – Minimum Wages and Its Negative Effects on Adolescent Fertility
This article is quite different from the others. It discovers a whole new downfall to these wages. Prior to this reading, I never would have imagined these two topics could correlate in the slightest. However, my eyes were opened after concluding this article. Bullinger’s research indicates negative effects on fertility to adolescent parents. Not only does it harm the child before it is born, if it makes it that long of course.
But after birth, the young parents are almost certain to be stuck in minimum wage type employment opportunities. One very interesting point that the author made is when she claimed: “Higher wages might keep adolescents attached to the labor market—potentially increasing their future advancement opportunities—and thus provide a reason to delay childbearing or offer a chance to substitute work for leisure”
Chinkook, L., & O’Roak, B. (1999). Minimum Wage Increases Have Little Effect on Prices of Food Away From Home. Food Review, 22(1), 1-2.
This article offers a lot of valid information about the effects of such increases. It explores how increases have little effect on none on the product cost. The reasoning behind this surprising truth comes from the truth behind corporations. It shows that if employees are paid a little more it will not increase prices for consumers. The reason that large franchises refuse to increase wages is that obviously, they don’t have to because it is not illegal. But also, so that these collect all profits.
Many companies do not even allow employees to work the full 40 hours, so they cannot collect medical and other benefits. Corporations are quite self-oriented and treat employees the opposite of how human beings should be treated.
This article explores if minimum wages actually kill jobs. In all reality, most jobs are minimum wage jobs. There’s a huge debate about whether increasing wages hurt the business’s or not, but for the most part, these jobs are franchises.
This essentially means that they are well equipped to pay these increases. Employees are not treated well in these positions, while the companies sit back and make a lot of money. There is a wonderful graph located in this article that shows the percentage of change in various states when the minimum wage was increased. Several good conclusions can be made after reading this article. I say this because it explains clearly cause and effect which is highly essential for the research within my paper.
The New American Poverty was written I 1984 but still appears to be true within recent times alike. This article shows the real poverty of the United States, how it started, and why it remains to be this way. In this article, Harrington discusses minimum wages over the years. It is evident that it has not increased significantly, even from the 80’s.
This information is very essential to my research so that I can see the history of minimum wage and its fluctuations. I think that by showing this information, I can get my audience’s attention easily. This article is a well-represented article on the underlying issues of poverty in America.
In The Elusive Effects of Minimum Wages, Kennan discusses the several effects that minimum wage leads to. This article discusses the history of this program, and also shows the fluctuations in prices as the article above does. Some of the conclusions were difficult to understand because professional theories and words are included.
However, what can be understood is very valuable, which is why I plan to utilize this article. Many graphs are utilized in this article to help show the results of the tests, however, some of the graphs are difficult to make generalizations from. I feel Kennan should have been more respectful when crafting this article, what he needs to understand, is that not everyone is able to interpret these findings.
This 1999 article explores wage inequality within the United States. Lee offers several rational ideas as to the reasoning behind these issues. This inequality began during the 1980s and is still happening today. There were several occurrences that led up to this situation, and the solution is not easily influenced. This is because with changing wages, comes a plethora of other problems.
These ideas are explained in this essay and lead to several realizations that are worthy of exploring. Another noteworthy component of this journal is that it provides comparisons of income and other social aspects of wages to help audiences understand the scope of these inequality issues.
Neumark and Wascher were authors in two of my document sources. I feel that both know quite a bit on the topic, and would prove worthy of inclusion in my research. This article explores the possibilities of benefits if wages are increased. The title explains much of the basis of the article “Will increasing minimum wage help the poor”. Most people would agree that it would help, and to a sense, it certainly would. However, this article breaks down, that even an increase is possibly not enough to help many people.
There are so many things holding people back that stretch past financial situations. This article explores many negative situations occurring in the United States that are not equipped to hinder the process. Although finances are a huge portion of the problem, they do not make up the entire puzzle.
Not only are employees effected by money aspects of the minimum wage, but their labor is also affected along with many other components. This article talks about how labor developments prompted these changes. But also, explains how these laws are not always being kept within jobs. There are many rights that workers deserve, but aren’t always granted. The authors also explore the percentages of people who receive the minimum wage, which breaks down the numbers quite well and paints a picture of the working class receiving minimum wage.
This information is quite significant regarding my topic. It explains to us how these issues have been around for a long time and how to change certainly should be applied. Another strong component of this article is that explains who and how this figure of a minimum wage is created. Since it is different in every state, I feel this information is essential to a better understanding of topics such as these.
Example #3 – Minimum Wage Legislation
I am going to pose the question to you the students of Sir Sandford Fleming College, do you really want the minimum wage legislation left in effect? As college students, you are not benefiting or gaining anything from minimum wage legislation. The minimum wage legislation requires all employees to be paid at least some fixed given dollar amount per hour. This sounds good, but it isn’t all that it seems!
Minimum wage is an example of government intervention. The government has put a minimum on the dollar amount that employers can pay their employees. Unfortunately when we implement solutions like the minimum wage, it is too late to actually fix the problem, so in most cases, it has effects that we cannot foresee as it is a reaction instead of a prevention method. A minimum wage actually helps very few people. The only ones that benefit from the minimum wage are those unskilled workers who are currently employed. The minimum wage restricts employment opportunities for the young, inexperienced, and those people with educational disadvantages.
They will continue to find themselves handicapped in the job market as long as the minimum wage legislation remains in effect. In society today the demand for “unskilled” workers is low and the supply is high, therefore there is a surplus of unskilled workers in the job market. The effect of a surplus drives down an individual’s reservation wage, as they are willing to do and take anything for work. Minimum wage only makes this fact more severe, as it increases the supply of workers.
Minimum wage increases the cost of doing business, and unfortunately, in today’s economic conditions employers are not able to pass on the extra costs to the consumer. Minimum wage is not helping workers, it is hurting businesses, and to maintain any profit, and follow legislation companies have to cut labor costs somehow. Companies are being forced to take other alternatives because of higher labor costs for unskilled workers. Businesses are forced to:
- Cut back current employees hours
- Not hire any more employees
- Let employees go
As you can see the reactions to minimum wage actually decrease opportunities for the “unskilled” workers, instead of providing them. With any change in the minimum wage the demand will decrease/increase dramatically, and exactly the opposite for skilled workers. When the minimum wage changes the demand for skilled workers remains the same regardless, but if there is a change it is very minute. Overall the number of job opportunities is decreasing, because the costs of labor is increasing for the unskilled worker, and it will be the unskilled workers who are the first to go in these situations because they do not have the specialized skills that make them irreplaceable.
Wages are used to compensating workers for their time, skill, and money that they have invested in themselves. The trend is for higher education, which in return receives higher wages. The reservation wage of skilled workers is higher than unskilled because they would like to receive some return on their investment, their education.
As college students, we should be able to relate to this concept as we have put more time, effort, and money into ourselves than some others, like high school students and we should be compensated for this by of course a better rate of pay.
After one year of college, you should receive more than minimum wage as you have bettered your skills and invested at least $3000 to do so. This is the only direct cost, you also have to take into consideration the opportunity costs you would have. The opportunity costs for a college student is the wages you could have been earning instead of attending school as well as the time you could be traveling or starting a family, or whatever you gave up to go to college, and you want to be compensated for them.
We would like to encourage more people into getting a better education, but unfortunately, the minimum wage is working against us. The opportunity costs for some people to attend college seem too high, so if we decreased the minimum wage maybe more people would attend college. This would help out people individually as well as society, it would actually spread out the supply of labor a bit more, and turn to decrease the level of unemployment and poverty.
Wages are compensation for your skills, effort, responsibility, and working conditions, and they should be rated and fluctuated by these categories. Unfortunately, the minimum wage disregards all of this. Regardless of your education, skills, effort, you can still receive a minimum wage. A minimum wage is a fixed dollar amount that is paid for many jobs that can not even be compared. Most of these jobs should have different pay rates, especially when the degree of skill is higher, but they don’t.
The government keeps increasing the minimum wage, and making it tougher on businesses and at the same time discouraging unskilled workers from bettering themselves, and for what. The economy is not booming, and even with increasing minimum wage rates, the economy is not seeing any extra money being put back into circulation. As well, the higher minimum wage rate keeps raising the level of unemployment.
I feel that if we put the burden on the people of Ontario to be and do the best they can that we would not need a minimum wage. The skills that we could produce would be widely demanded, so it would be to the benefit of many other unskilled minimum wage earners to support the abolishment of minimum wage legislation. You could receive better wages, and at the same time decrease the unemployment rate.
Example #4 – Should We Abolish The Minimum Wage?
Should We Abolish the Minimum Wage is not a question that should be ignored. From the time President Roosevelt signed the Fair Labor Standards Act (FLSA) in 1938 the $.25 minimum wage has risen up to its current condition to $5.15 an hour. (Industrial and Labor Relations Review) With many types of conflict that imposed upon it, the minimum wage has been a debate ever since it has been in effect. In recent month’s Congress and the Senate has attempted to pass the minimum wage from $5.15 to $6.15 per hour. (Your Rights Under The FLSA) With both the public support and the political support it seems like there might be a possibility of an increase. With an increase, we can see more of a possible living wage then this poor minimum wage that we have now. (A Fair Economy)
In our current job atmosphere, there is a huge demand for highly skilled workers. The current condition can not be met due to the fact that there are not as many skilled workers as there is unskilled which is creating a crisis. This crisis in which we have two sides, one side who are employed workers and on the other side we have workers who can’t be employed because they don’t have any type of skills.(Review of Political Economics) The crisis we face can be resolved with the minimum wage in which promotes self-sufficiency by raising the wages of the working poor to a level that enables them to provide for their own without the assistance of others. (A Fair Economy)
The (FLSA) was created in 1938 when Theodore Roosevelt decided to sign the bill in which banned oppressive child labor and set the minimum wage standard to twenty-five cents an hour. The bill also created the maximum workweek to 44 hours. (Industrial and Labor Relations Review)
With Mr. Roosevelt signing the act American society changed for the better. The youth was no longer employed at early age. Instead of working 40 plus hours, a week children were in school getting the education that they needed. The minimum wage also protected women. Since women didn’t bring home as much as men they were set with the wage so at least they can bring home a fair share. (A Fair Economy)
In Today’s society, the current minimum wage is $5.15 per hour and the maximum hours per week is 40. Once over 40 hours there is overtime which is time and a half. The bill in which increased the minimum wage from $4.25 to 5.15 was signed by President Clinton which was in full effect on September 1, 1997. (Industrial And Labor Relations Review) Certain conditions were created as well to set standards for wage and hour division. Conditions such as Tip Credit, Youth Subminimum Wage, Travel Time in Employer Vehicle, Enforcement, and Computer Exceptions. (Your Rights Under the FLSA)
Tip Credit allows an employer’s cash wage obligation at $2.13 an hour. Before employers were able to credit a certain amount of the tips received by tipped employees (ex: Waiters and Waitresses) against the employer’s minimum wage obligation when certain conditions are met. Although if an employee’s tips combined with the employer’s cash wage of $2.13 an hour do not equal the minimum hourly wage, the employer must make up the difference. It also means that the waiter wasn’t doing his job right. (Your Rights Under The FLSA)
Youth Subminimum Wage
A subminimum wage of $ 4.25 an hour is established for employees under 20 years old for there first 90 days of employment with an employer. Employers are also prohibited from displacing employees in order to hire youth at the subminimum wage because of its unfairness to employees over 20. It also prohibits reducing employee’s hours, wages, or employment benefits. (Effects Of The Minimum Wage)
Travel Time in Employer Vehicles
The time between going to work even in an employer’s vehicle is not considered worked hours. For ex: (I punch in at my job and then leave for my work site. When I get to my work site I sign in. From the time I sign in to the time I sign out, I get paid for. When I leave the worksite and go back to the office I punch out.) Between that time where it’s to the site or back to the office I do not get paid. (Your Rights Under The FLSA)
The Department Of Labor investigates any wrongdoing from an employer. The Department Of Labor can collect wages your employer owes and can fine them if a minor works more hours then there suppose to. They can also get fined for every violation they commit. Law prohibits employers to discharge an employee after a complaint has been filed because it is discriminatory toward the employee. (Your Rights Under The FLSA)
Computer Exemptions are created for computer professionals who get paid for at least $27.63 an hour. The exemption is in effect because the professional is paid six and a half times the minimum wage. (Your Rights Under The FLSA)
Without the minimum wage, and government intervention like the Department Of Labor and the (FLSA) we would have discrimination in the workplace. The U.S. economy would not be as stable as it is. Children would be working at younger ages and would not be able to get sufficient education that they should get because they have to help the family.
Employers would make their employees work for massive hours, low wages, and no benefits. Employees would be taken advantage of by their employer and would have to follow by their Employer’s guidelines. Minimum wage is important to our society because it is a set standard that basically promotes fairness between employers and employees. Thanks to Mr. Roosevelt our economic standards in the new Millenium are well off. This doesn’t mean that $5.15 an hour is a living wage. But with time and patients, we will see that the standards are set higher for future generations.
It sounds simple to raise the minimum wage, reward hard work, and strike a blow against society’s inequalities. It’s an emotional argument that blurs out the truth and makes people forget one important economic lesson: There’s no such thing as a free lunch. The minimum wage has not been increased since the industrial welfare commission raised it to $4.25 an hour. The IWC and the legislature have not agreed since that time that any additional increase is justified because of California’s recession and the downward turn in the business climate.
There was a measure out on this last ballot called prop 210 which passed and increased the minimum wage from $4.25 an hour to $4.75 an hour and on March 1, 1997 it will raise to $5.00 an hour and beginning March 1, 1998 it will increase to $5.75. The minimum wage in California has increased nine times in the past thirty years rising from $1.30 per hour in the mid-1960s to $4.25 per hour as of July 1996. The increase has been less than the rate of inflation during this period.
The vast majority of the 22,000 members of the American Economic Association agree that increasing the minimum wage will increase unemployment among young, unskilled workers. This 35% hike in the minimum wage paid by the business will be one of the biggest increases in California history. And, it will hit just when the state is recovering from a long recession.
Approximately 2 million of California’s nearly 13 million workers earn less than $5.75 per hour. Most of these workers would be directly affected by this increase. Roughly one-fourth of those earning less than the proposed $5.75 minimum wage are teenagers, while the remaining three-fourths are adults age 20 and over. Industries employing significant numbers of these workers include retail stores, child care facilities, restaurants, and fast-food franchises.
Much of the fiscal impacts of this measure would be related to its various effects on the economy, including changes in employment, prices, and profits. For example, most employees earning less than the proposed minimum wage would earn more. They would also spend more on goods and services, thereby generating certain increases in economic activities. At the same time, however, employers would face higher wage costs, which they would either absorb in the form of lower profits or attempt to offset through a variety of means. For instance, they may attempt to shift or pass along the cost of higher wages to the consumer by raising prices of the goods and services they sell.
Alternatively, some employers may offset the cost of the increase in wages by automating, hiring fewer employees, reducing the hours, or limiting fringe benefits. Some businesses that are not able to shift the effects of the higher minimum wage may reduce economic activity in California. This would most likely occur in industries that have a large share of expenses for low-wage workers or that are subject to competition from other states and other countries.
In my view, an increase in the minimum wage would result in some decline in employment and business activity in California relative to what would otherwise have occurred. This increase would have a varying effects on state and local revenues. For instance, a reduction in business activity, employment, and income in California would result in lower income tax revenues. These declines could be offset, however, by increased spending on goods subject to the sales tax.
The higher sales tax would occur if businesses raised prices of taxed goods in response to the increase in the minimum wage, and this increase is not offset by reducing quantities of goods sold. Sales tax could also increase if those receiving the higher minimum wage spent a relatively high portion of their net earnings on goods subject to the sales tax.
How the minimum wage should be changed, in California minimum wage increases have usually occurred in one of two ways. The first is a change in the federal minimum wage, which results in an increase in California’s minimum wage to the new higher federal level. The second is a state administrative process. Under this process, the California Industrial Welfare Commission can, by a majority vote of its members, issue wage orders to raise the state minimum wage for workers in any occupation, trade, or industry.
The commission considers information from business, labor, and the public through a series of hearings. This process was last used by the commission in 1988 when it increased the minimum wage from $3.35 per hour to $4.25 per hour. This measure would require the Industrial Welfare Commission to issue minimum wage orders consistent with the proposed minimum wage increase.
This increase in wages was too steep of an increase nobody is really benefiting from this, although it makes the employees earning the higher wage feel better. I think a slow increase over time would have been better for the employee because you would actually see your increase in money staying in your pocket. Right now with your wages rising, your cost of living is also rising so in actuality you are spending more.
Example #6 – Minimum Wage And Why We Should Leave It
When was the last time a “value” meal from McDonald, let alone any other fast-food chain, did not cost five dollars or more? When was the last time premium gas was under a dollar a gallon? It’s hard to remember, isn’t it? Wouldn’t it be great if everything cost a nickel, like back in the good old’ days? According to the laws of economics, it’s not logical for things to have gotten more expensive competition should drive prices down. Then why have prices continued to rise over the years?
The continuing demand for more money for less work has forced Uncle Sam to raise the minimum wage innumerable times in the last half-century, which results in higher prices for the rest of us. Another raise in the minimum wage would, as all the others before it, raise prices for consumers, which would again result in another demand for a raise in the minimum wage.
It’s a vicious cycle that must be stopped before it loses control. Not only does a raise in minimum wage result in a rise in the cost of living, but it also causes the dismissal of hardworking people who are happy with their current income.
When the firing ax starts to fall, seniority often determines who goes and who stays. The more a single employee costs a business an hour, the fewer employees the business can afford to employ an hour. This results in the dismissal of employees to compensate for a rise in labor costs, which creates a smaller staff, which results in slipshod service. Although most reasonable people would rather pay more for better service, the plain fact of the matter is that the service hasn’t really gotten any better.
The service is better than it was when there weren’t enough employees so people assume the service itself has gotten better, while the truth is that the service is just as haphazard as before. The laborers are simply replaced because of a need for more employees, more often than not by people who have never worked in those positions before.
By having a staff that is constantly fluctuating, the business hurts itself the service is hurt because the new employees are in need of training, and in the end, it is us, the consumers, who feel the real pain The pain we experience is that of rising costs in the market it’s that sharp pain we feel every time we reach for our wallet, but it is in no way as painful as the fact that we give bonuses for no reason in the form of raises in the minimum wage.
The argument that minimum wage should be raised says people need more money to make a living in a world of ever-rising costs. The truth is that they, the people who demand more money, are the ones raising the cost of living. Some would say that the high cost of living is brought about by the devaluation of the dollar and the effects of inflation.
Truth be told, inflation is also caused by the flooding of the market with bills printed to pay the high costs of laborers in the market. Laborers are comprised primarily of teens and the elderly, both of which usually have an alternate form of income either in the form of parents or social security.
I offer an alternative to the minimum wage. If people would respect their money and understand the value of the dollar then they would have to learn skills that would promote them in the job market. The minimum wage could be kept for the handicapped and the disabled, people who for the most part aren’t able to advance themselves in the working world.
The most positive thing about the current minimum wage is that it is substantial enough to make teens respect their money, but also low enough to force them to save. It’s been said that if we do not know our history, we will be doomed to repeat it. The argument over the minimum wage makes it abhorrently obvious that this statement is true. The time for action is now before we are forced to start this cycle again.
Raising minimum wages actually promotes growth (Meroney, 1995) and will have a positive effect on the economy. The positive effect will come from promoting job growth. This statement was made by U.S. Labor Secretary Robert Reich. Reich recommended that the minimum wage of $4.25 and hour be pushed up to $5.15 an hour over a two-year period.
Reich said it has been shown that pushing the minimum wage up, would assist in welfare reform, and lower the number of persons on welfare, by making wages high enough to motivate people to go to work, rather than stay on welfare. And with more people in the job market, with more money to spend, increases would be shown in both gross national product sales and an increase in taxes derived from sales taxes.
Although the anti-minimum wage faction states that raising the minimum wage would put more people out of work, a study in 1992 by Larry Hunter, the chief economist for the Joint Economic Committee, stated that after interviewing restaurant owners regarding the effects of raising minimum wages, it was found that no jobs were lost. The study was done in New Jersey, where the legislature had boosted minimum wage to the highest level in the United States (Meroney, 1995). What happens said Hunter, is that people don t go out and begin firing workers after a rise in minimum wages. You just adjust.
A negative in adjustment sometimes comes in the form of lowering the number of total hours worked by employees while encouraging the workers to increase the amount of work output in job performance. But overall, the study indicated that lower minimum wages actually encourage more mothers on welfare to stay on welfare. Where minimum wages were the lowest, there were the highest rates in persons on welfare.
Another argument for raising minimum wages comes from the view that higher wages increase purchasing power (Rothstein, 1993). Low wages results in the inability of the U.S. to absorb exports, and a need to sell goods at lower prices in the American market. Low-wage competition from the nations with low wages then puts pressure on the U.S. living standards as domestic manufacturers cut wages and benefits to compete. Wage growth in developing nations is therefore essential not only for their own welfare but for the welfare of the American workers as well.
Because of the current trend in unregulated free trade, if wages are not raised to increase Americans purchasing power, the problem of the inability to absorb exports will be exacerbated. This will cause the international competitive environment based on low wages to act as a permanent brake on income growth in developing nations, which will then deny American exporters consumer markets and growth in income.
An increase in minimum wages, therefore, should be encouraged worldwide, because if workers in other countries are too poor to purchase their own products, then their employers will have no choice but to export to the developed world products that are cheaply priced.
Furthermore low wages in foreign countries, contribute to political instability (Rothstein, 1993), in which the U.S. has a stake, in that it is often the U.S. taxpayer that has to bail other countries out of financial dilemmas or increase defense spending to keep the peace in countries that are unstable and a threat to the U.S. because of economic disparity.
It is also argued by Rothstein that although free trade is now a reality with great expectations, the success of Asia and especially South Korea and Taiwan, was achieved through severe trade protection, tight state controls on capital and labor unions, and manipulating exchange rates. Worker salaries were also regulated, but with the intent to allow the workers to buy the products made in the home country to lessen the costs of exporting, with much of the profits staying in-country.
In so-called free trade countries such as the U.S. imports and exports may be shared without penalties or tariffs, but the worker’s salaries are regulated by corporate ownership. Therefore, free trade is a misnomer, in that the major part of manufacturing is regulated not
only by the corporation but by government wage policies. Argentina is just now finding out that increased minimum wages, also results in increased tax-collections that could be of major benefit to the poor (Rothstein, 1993).
Since 1991, Argentina has demonstrated the highest level of economic growth in Latin American, averaging almost 9% a year. The International Monetary Fund is now using Argentina as growth and economic model. The only problem with Argentina is that the oppressive and corrupt government has not used the increase in tax collections for enhancing or providing public services, and public unrest is beginning to affect the country s economic and political stability.
Therefore, an increase in the minimum wage, be it in the U.S. or elsewhere must be tied to an increase in public services to be effective.
Mexico is another case in point for the effects of lower minimum wages. Although Mexico has statistically demonstrated an increase in the balance-of-trade statistics, by increasing manufacturing with the product’s final destination as the U.S., what good is exportation, if in return the Mexicans cannot buy U.S. products. A continued lower minimum wage in the U.S. will affect the balance of trade elsewhere, and currently, such heartening statistics as is demonstrated in Mexico is only a `shell game with disastrous results which are sure to occur in the near
future. It is higher minimum wages and labor standards that are the engine of both domestic and foreign growth. Higher minimum wages also assist in relieving pressure on American manufacturers to reduce wages at home by supplementing external export markets.
Many people forget that historically the legislation that created minimum wages of 25 cents an hour (Anderson, 1988) in 1938, was to inhibit the flight of workers from low wages in the South to higher-paying states in New England.
The flight of workers from the South to New England was causing a drain in manufacturing capabilities in the South, and exploitation of the workers in the North through the lowering of wages. The resulting competitive spiral would have set off another Great Depression just as devastating as the one experienced in 1929.
The resulting minimum wage passed by Congress was also tied to the Fair Labor Standards, which stated that real economic growth could not proceed unless workers had the adequate purchasing power to consume the goods they produced and that a minimum wage was needed to assure minimally adequate purchasing power for economic prosperity. Such observations made in 1938, which was applied to interstate markets and workers in the U.S. are still valid, but the validation for increasing the minimum wage now applies to the global economy, as borders and frontiers have been breached and opened to world markets.
In a short-sighted economic philosophy of American manufacturers flight to Mexico to create `macheadoras using cheap labor, the American manufacturer is then setting up a situation where more American workers will become unemployed, and less able to buy American products, which is the end destination of the `macheadoras products.
With fewer Americans employed, fewer products will be bought, more Americans will have to go on either welfare of some type of assistance program, which means that other manufacturers will have to pay higher taxes, and possibly higher import duties on foreign products, causing further lowering of wages.
Therefore, not increasing the minimum wage over time, will have disastrous effects in the U.S. and worldwide. Although it appears that many people, especially in fast food and service jobs receive the minimum wage, a Washington-based study group, the Economic Policy Institute, noted that only 2.4% of the workforce in Indiana earns minimum wage.
Only another 7.9% is paid $4.25 to $4.99 an hour. The usual entry-level in Indiana is $6 an hour. The reason for such so-called high wages is that the job market is tight, and if employees don t pay higher wages in starting salaries, the workers will go elsewhere to work (Shankle, 1995). Therefore, the reverse effect appears to be that if employers continue to pay low wages, then skilled workers or entry-level workers with the ability to move will
go to other areas where higher wages are paid. Higher minimum wages appear to guarantee a stable labor pool for the employer.
Although some textbooks often teach that increasing the minimum wage leads to greater unemployment among workers with low skills, recent studies and interviews have not born this out to be as once factual as first thought (Zycher, 1995).
Both sides of the databases for and against raising minimum wages appear to be flawed, in that in the study of labor it is the number of work hours, and the expected productivity of the given workers, which makes a difference if wages rise by decree. Such productivity, at face value, appears to be detrimental to the worker. However, such expectations create a more highly skilled worker that can then seek employment with both higher wages, based on practiced skill.
For example, a person that starts at a higher minimum wage, will stay in a job longer, increase his or her skill on the job, and instead of moving from job to job at the same pay level, will be able to rise to more supervisory positions, that pay more and that provide more compensatory benefits such as health care. Skipping from job to job, in the view of a prospective employer, does not engender confidence in paying a worker higher starting wages, as training for new employees if often costly. Low
entry-level employees hired at subsistence minimum wage, also do not have the opportunity, due to lack of funds to increase his or her education, nor are they provided with fringe benefits and compensation packages.
Compensation packages have slowly crept upward from 1929 when mandated benefits were first enacted. In 1929, only 0.6% of employees had mandated benefits, and by 1989, mandated benefits still only covered about 8.7% of the working population employed by private employers (Gruber and Kruger, 1990).
In studies of the reasons for such a slow rise in mandated benefits, especially for entry-level workers, it appears employers cannot simultaneously accommodate entry-level workers in a way that serves the worker’s long-term interests. The reason being that mandated benefits, accompanying mandated rises in the minimum wage, will crowd the job market out for entry-level workers that desperately need on-the-job-training, in favor of older, more skilled workers.
Therefore, although an increase in the minimum wage should be enacted, it should not be followed with or tied to mandated benefits, as such a marriage would defeat the whole purpose of raising the minimum wage.