Minimum Wage Increase Has A Maximum ImpactEssay Preview: Minimum Wage Increase Has A Maximum ImpactReport this essayIt sounds like good news for the low-income workers and their families whenever the government increases the minimum wage. The United States Congress adopted the Fair Labor Standards Act in 1938. Congress created the minimum wage toward the end of the Depression era to ensure a “minimum standard of living necessary for health, efficiency, and general well-being for workers” (Wages). The Fair Labor Standard Act establishes minimum wage, overtime pay, recordkeeping, and child labor standards affecting full-time and part-time workers in the private sector and in Federal, State, and local governments. Covered nonexempt workers are entitled to a minimum wage of not less than $5.15 an hour.
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 raising 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. However, upon closer analytical examination, it can be seen that raising the minimum wage has a perverse effect and examining the minimum wage law itself can show a dynamic effect when raising the wage floors.
On the surface minimum wage laws seem like the best prescription to treat poverty and improve living standards of the working poor. Advocates first defense of the minimum wage floor and its increase is that the firm can pass the costs occurred by the wage hike to its customers. Another defense is that advacates deny claims of links between the minimum wage and the impacts upon employment, and suggest that in any event, greater social benefit derives from minimum wage laws. For example, Santa Fe employers affected by the city minimum-wage law increased the number of employees overall by .35 employees when compared to the year before the ordinance took effect. During the same period, overall employment levels in Albuquerque fell by 2.4 employees without an increase in minimum wage (Lopez).
Promoters of minimum wage laws are also taking positions that such laws alleviate poverty and improve the conditions of life of the working poor (“Making Work Pay”). According to the Department of Labor, nearly 6.45 percent of the labor force is earning minimum wages. By having minimum wage laws the government is trying to ensure that everyone has a better standard of living and a more equal chance of competing with the higher income families and a fairer chance to improve their economic condition. According to the Employment Policies Institute, the average family affected by the minimum wage has an annual income of $43,000 because seven out of 10 minimum-wage workers live with a working spouse or relatives. Furthermore, the average income of minimum-wage workers increases by 30% within one year of employment on the basis of learned skills. Wage increases due to increased skill levels explain the fact that only 2.8% of workers over the age of 30 are receiving the minimum wage (Crane).
The argument that the firm can pass the costs occurred by the wage hike to its customers is not a valid one. Robert Shapiro, lead economist at the Progressive Policy Institute says that about 80 percent of the costs of an increase in the minimum wage are passed on in the form of higher prices. A survey of small businesses found that after a wage increase 28 percent raised prices, 26 percent postponed expansion plans, 14 percent terminated at least one employee, and 9 percent did two of the preceding. Many firms have also turned to automation to reduce the threat of wage increases (Hamond & Hogan).
If minimum wage is raised, unemployment will grow. The reason for this is that the supply exceeds the demand. A wage is simply a special type of price, specifically the price of labor services. The most universally accepted application in economics is the Law of Demand. When other things are held constant, if prices go up, buyers will buy less. Thus if labor becomes more expensive, employers will hire fewer workers (Posner 346). That is because some workers who would have been profitable to hire become unprofitable. A second well-accepted proposition is the Law of Supply. The higher the price suppliers receive, the more they will supply. Putting the two laws of economics together, higher wages increase the number of workers willing to work but decrease the number of workers employers will hire. Artificially raising wages by governmental law creates a surplus of labor, better known as unemployment.
Low-wage workers are most affected by these laws. Some workers will gain from the wage increase through higher income; however, these gains come at the expense of other workers. Groups with the lowest levels of productivity suffer the greatest loss. Low-wage workers will be forced into second-best employment or into unemployment, which often include the teens, minorities, elderly, handicapped, and those without skills (Turner).
Minimum wage actually helps very few people. The only ones that benefit from minimum wage are those unskilled workers who are currently employed. 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 increases. The increase in minimum wage laws do not alleviate low-wage and unskilled workers from poverty. They serve a purpose of keeping the poor people poor. The minimum wage laws make unskilled workers handicapped forever by taking the element of incentive away from them. Ones labor is the most valuable property one has to sell. Variance in wages and earnings among workers at different levels of skill provide an incentive system of investment in skill acquisition.
Wages are used to compensate workers for their time, skill, and money that they have invested into themselves. The trend is for higher education, which in return receives higher wages. The reservation wage of skilled workers is higher then unskilled workers because they would like to receive some return on their investment, their education. College students should be able to relate to this concept as they have put more time, effort and money in to themselves then some others, like high school students, and they should be compensated for this by 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 the direct cost; you also have to take into consideration the opportunity costs the college student would have. The opportunity costs for a college student is the wages one could have been earning instead of attending school as well as the time one could be traveling
The Student’s Affiliation to the College
The student’s affiliation to the college determines the actual payment the college must make, and is based on the amount of money the college student earned.
Coupons are used to pay the student fees paid by the college. Students who are already enrolled in the college can make a monthly payment of $5 to $25 and use these for the school’s monthly payment of $15. These payments should be deposited into the university’s bank account and paid according to the dollar amount of interest.
Coupons are usually applied to the student at the college’s discretion, or at any time before the semester begins
In some schools, which are more or less full fledged college places, some students will be paid in advance rather than in full tuition. In such cases, a small percentage of the student will earn a monthly payment for the rest of their academic-related student year after graduation. Any portion of the interest paid by the college is usually paid back by the student at any time.
For a student to be properly prepared for college employment, it is important to find suitable careers for the student to complete his/her postsecondary education.
Employment, which usually covers a few years at a university, is not for the sole purpose of attracting people. There exists a substantial number of people whose positions are not for employment after graduation or at a time when they are in search of a career.
There are numerous ways of securing employment that are not for direct investment or that do not involve direct risk to their family and their savings. For instance, it is not necessary to invest in an investment vehicle or business such as a stock exchange, savings bank, or savings portal or to have a child enrolled as a private student in a university.
Education is about learning, so one should try to find employment in certain careers. Education could include courses that teach oneself to use the language, tools, and knowledge of other students and other people, as well as education to gain knowledge, skills, and knowledge. Also, for an individual who is interested in an employment situation, one should take into consideration the value for money that can be spent by other people in the situation, and how much money this can help.
Citizens in higher education should also be evaluated for their academic record and their ability to be employable.
Some organizations are taking legal action regarding certain college degree degrees. For example, the California Higher Education Law Institute encourages those who are certified as attorneys to enroll in this degree program in their home state. The California Higher Education Law Institute’s student enrollment policy makes certain students eligible for the graduate school degree at the university.
I am often asked why universities provide higher education loans to those in high school who do not possess enough money to support themselves or depend on their relatives.
Student Loan Repayment Program