...charged issue such as raising the federal minimum wage. Proponents and critics alike tend to bolster their positions by publishing the opinions of economists who share their political bent. Does raising it have a measurable effect on the rest of the economy, including the issue of inflation? Yes. Can a rise in the inflation rate be attributed directly to a rise in the minimum wage? Not necessarily. Both sides of the debate do present persuasive arguments, but these arguments may be based on skewed or purely theoretical assumptions. There is a relationship between setting the new minimum wage and inflation, but it's more of a cart before the horse situation. Many proponents of a raised federal minimum wage support the idea of matching the new base wage to the current rate of inflation, a process known as indexing. By doing this, proponents believe the wage-earner's real spending power will also be increased. When a wage hike does not keep up with inflation, which has been the case in recent years, the workers' paychecks may get a little larger but inflated prices of goods and services actually reduce the spending power of that raise. So we know that inflation can have a detrimental effect on the real spending power, but does a raised minimum wage cause inflation? Yes and no. From an economic standpoint, inflation can be caused by any number of new or increased costs of production, including an increase in workers' wages. If a company must increase the amount it...
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...arguments for and against raising the minimum wage are almost unavoidable in the labor market, with each side having individually strong points. Advocates say that anyone who works 40 hours a week or more deserves to earn a decent living wage and get out of poverty, while opponents argue that high wages cost jobs. Most of the arguments for increasing the minimum wage are more emotional pleas and theories with very little evidence for achieving the desired outcome. The truth is that raising the minimum wage does not lead people to get out of poverty, but what it does is make it more difficult for younger workers to find entry-level jobs to build their skills. By raising the minimum wage, experts argue that it will make it more difficult for younger workers entering the workforce to get a job. Employers will be hiring workers with more experience and skills, since they can attract these workers with higher wages. Therefore, raising the minimum wage may be causing more harm to a younger workforce looking to find their first job to gain relevant work experience. Our country needs to focus on the inconvenient truths about the real impact around raising the minimum wage. Some of these inconvenient truths are highlighted by the research that clearly shows how raising the minimum wage may cause more harm than good, and have significant consequences to the younger and entry-level workers vs. the emotional theories that state increasing the minimum wage will get more people out of poverty...
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...the minimum wage, the time is now,” said Delegate Derek E. Davis, of Price George’s County. The increase in minimum wages has been a topic that has been on the rise with much controversy involved. President Obama wants state and lawmakers to increase the minimum wage from $7.25 to $10.10 per hour by 2018. Connecticut was the first state to pass the law, which will increase their minimum wage to $10.10 by January 1, 2017. Maryland is a year and half behind them, making the minimum wage $10.10 by July 1, 2018. The reason for Maryland’s delay is because they want to give businesses more time to adjust to the new and increasing price. The increases will be in steps. The first increase will be from now until July 2018, and will increase to $8 per hour on January 1, 2015. The second increase will be to $8.75 per hour in July 2016. The third increase will be to $9.25 in July 2017, and then the final increase to $10.10 in 2018. The graph below, from the congressional budget office website, shows the increases of wages over the time period. President Obama commended Martin O’Malley and other lawmakers for “leading by example” in hopes that congress will follow. However, some counties have been setting their minimum wages even higher than $10.10. Montgomery and Prince George’s counties have approved their minimum wage increase to $11.50 by 2017. However, businesses are going to be allowed to pay a lower training wage to workers under 20 years old. However, this increase in wages has...
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...indefinitely on a job that pays $7.25 an hour? That is the national minimum wage set by the Fair Labor Standards Act in 2009. Projecting this to a 40-hour work week over 50 weeks it comes to a total of $14,500 a year. This is just above the U.S poverty level for a family of 2, but below the poverty level of $22,050 for a family of 4. Despite the fact that the minimum wage has been increased 3 times since 2007, it is almost $3.00 below what it was nearly forty years ago in purchasing power. It has not kept up with inflation. If it had, the minimum wage would be $10.74 per hour. In other words, the minimum wage is a far cry from being a living wage which is a wage that is high enough for fulltime workers to provide a decent life for themselves and their families. For the benefit of American citizens and the economy, the minimum wage must be increased! Those opposed to an increase in the minimum wage focus on a number of assumptions suggesting it would be a bad idea. Under close examination, all of their arguments fall apart. One of the main arguments for not raising the minimum wage is that it is a job killer. The reasoning is the increase in salary decreases profits and results in cutbacks in hiring. However, a study at the University of California, Berkeley, has shown that raising the minimum wage does not have a negative effect on employment. An analysis of those states that independently increased the minimum wage “had job growth slightly above the national average.” Another...
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...The Lowest Wage Name of Student Institutional Affiliation The Lowest Wage The minimum wage should remain at $7.25 as is the current level across numerous states. There have been numerous attempts to push for the raise of the minimum wage bill with a belief that the move will aid in improving the living standards of the poor and majority of the middle-class citizens. My argument against the rise of the minimum wage bill is based on some disadvantages that may arise due to an increment of the minimum wage bill. First, a rise in the minimum wage may hurt the middle class due to a resultant inflation of commodity prices. An increase in the minimum wage would mean that the employers would have to increase payments to the employees. With such a move, the employer would be forced to pass the extra costs to the consumers of their products hence inflation. Second, an increment in the minimum wage would be a threat to employment. Such an increase would lead to a rise in the payroll costs for the employers thus reducing or affecting their income. The consequence of this would be a reduction in employment, a decrease in hours of operation and even a reduction in the number of employees through layoffs. In fact, a study by the Congressional Budget Office shows that the proposed raise in the federal minimum wage to $10.10 could consequently lead to one million workers losing their jobs (Tejvan, 2015). The move would, therefore, burden the nation with high numbers of unemployed individuals...
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...the national federal minimum wage from 7.25 percent to 10.10 percent to fill the gap of income inequality. Obama wants to give America a raise. He said, “That too many Americans are working just to get by. Some are not working at all.” He wants to speed economic growth by putting more money into the pockets of the low-income families. He wants to help them get out of poverty by raising the federal minimum wage and pegging it to inflation. The President believes that this solution will help big businesses in the long run by decreasing employee training cost and cutting back on high turnovers. In contrary, Obama will hurt the people he is trying to help. “This proposal will only harm the people the President wants to help, especially teens, who have already endured more than four years of 20+percent unemployment,” Saltman said. “If the President wants to boost the economy and have an impact on the country’s unemployment rate, he needs to lower barriers to hiring, not raise them.” The minimum wage class is mostly made up of teenagers and young adults. These people are usually people with low skills and have little or no experience. Some of them are first time job seekers just starting out in the work force. Most of us at some point in our lives have started out working a minimum wage job. Why? We need the minimum wage jobs to help us gain the experience we need to climb the success ladder for a higher paying job. They are stepping stone jobs. Minimum wage jobs were not intended...
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...Scope of Topic: Is a $15 minimum wage in large American cities fair to the affected businesses? On Nov 2014, San Francisco has voted to raise the minimum wage to $15 over a course of the next three years. This article intends to analyze the impact of the decision on businesses. The ripple effects of the wage hike are felt not just businesses that employ blue-collar workforce but also by larger corporations and the US economy as a whole. The wage hike is primarily aimed at providing economic stimulus to blue-collar workforce, who must live off their hourly wage. The article will be segmented into two parts – Fair and Unfair. Reasons that highlight both standpoints will be listed out and discussed in each segment. Fair to US Businesses Reduces employment and training costs. Employee turnover, ranging from 50 to 200%, is a serious problem among many businesses that employ a major chunk of the blue-collar workforce. (For example, an employer with annual turnover of 100% means that the firm is employing two different people for one position). All this translates to roughly 30 to 150% of yearly pay . Increases consumer spending due to increase in Purchasing Power Parity (PPP). Research undertaken by the federal government and also research agencies, indicates that wage hike results in approx. $50 B in spending. This increased spending can be captured by businesses in general. GDP grows by $22B , which leads to better business. Research by EPI, a research group funded...
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...Minimum Wage: The Effects of Minimum Wage on the Economy and Poverty Level in relation to Living Expenses Alison Denne Central Virginia Community College Minimum wage started with the “New Deal” program. In 1933, Roosevelt’s advisers decided to develop a National Industrial Recovery Act (NRA) to “suspend antitrust laws so that industries could enforce fair-trade codes resulting in less competition and higher wages” (Grossman, 1978). In his President’s Reemployment Agreement, Roosevelt accepted “to raise wages, create employment, and thus restore business” (Grossman, 1978). This began the arrangement of the government creating a policy for the working class. In order to offset the “overwork, underpay” regulations in the US economy,...
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...Minimum wage has changed many times throughout the years. There are many people who are affected by the changes that are made. Many believe that raising the minimum wage is a good idea and have pushed for the increase. Minimum wage has many effects on the economy: helping families with the cost of inflation, helping businesses thrive, and can also cause job loss. When minimum wage is raised it creates more money for workers. The boost in pay for families helps them to buy necessities, such as food, clothing, housing, and transportation. When products become more expensive, it is hard for families who only make minimum wage to purchase these items. Government will then tend to step in by increasing the minimum wage to an amount that can help with these expenses. “In his State of the Union address, Obama pressed to raise the hourly rate in stages to $9 an hour in 2015, up from the current $7.25, and index it to inflation. The change, should it become law, would boost the wages of 15 million Americans, according to the White House (Luhby, 2013).” When minimum wage is raised it will help “lift 900,000 families out of poverty and increase the incomes of 16.5 million low-wage workers in an average week (Lowrey, 2014).” Increasing the price of minimum wage can help businesses to thrive. When more people are being paid an increased amount than before, it would cause them to increase spending after receiving their paycheck. With receiving more money, families will tend...
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...only get paid minimum wage. The federal minimum wage is set at $7.25, as of 2009. Over the past 79 years, the national minimum wage has been raised 22 times (Minimum Wage Mythbusters). The wage has been increased due to inflation, or the decrease in value of currency. With inflation, everyday objects cost more than they did 70 years ago. The minimum wage today is less compared to the minimum wage of 1981. The base pay needs to be raised for the good of the people, and the good of the country. Increasing minimum wage in the United States will reduce its poverty, boost economic activity, and benefit and reward...
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...Should UK’s National Minimum Wage be increased? "I think Britain can afford a higher minimum wage. I think we have worked hard to get to this point and we can start to enjoy the fruits of all that hard work." This was said by George Osborne the Chancellor of the Exchequer and Second Lord of the Treasury of the United Kingdom. George Osborne has signalled that he is willing to raise the national minimum wage from £6.31-an-hour to £7-an-hour, an above-inflation increase. The National Minimum Wage was set up in 1998 to protect low-paid workers; however increase in the UK National Minimum Wage will cause more harm to the economy, employment sector and even the society than the proposed good. Students will leave their primary aim of getting educated to go in search of jobs; employers will employ less number of people thereby increasing unemployment; the economy will suffer lack of growth that might get Britain into bigger debts and probably a recession. Researchers from the Respected Organisation for Economic Co-operation and Development said Britain has more teenage drop-outs than in most other countries. Almost one in five young people in the UK are not educated to A-level standard which is a shocking figure. Increasing the national minimum wage will encourage high school student to drop-out and go in search of jobs. What does the future hold for the upcoming generation? The society of today is looking to this upcoming generation to...
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...22/06/15 The Effect of a Raise in the Minimum Wage on Employment and Profitabilty in the RMG Sector of Bangladesh, Drawing Sources From Other Developing Countries The study of minimum wages has led to many debates surrounding the topic whether a raise in minimum wage can kill businesses in profitability and employment or the change in profitability and employment is insignificant. This is a hot topic for policy makers in both developed and developing countries as a raise in minimum wage affects the economy in terms of economic growth, standards of living for the poor, survival of businesses and employment. A lot of research and literature has shown that a hike in minimum wages do not particularly affect the developed nations but the same hikes in developing countries can cause damage to firms depending on the size of the firms and their profitability. This paper attempts to show that the garments sector in Bangladesh (Ready made Garments Industry) faces the same dilemma. Since the Savar tragedy in late 2013 where a garment factory, Rana Plaza, collapsed which killed more than 1,100 people and injured and more than 2,500 people injured, garment workers and civil society demanded a raise of minimum wage from 3000 tk to 5,300 tk every month. This tragedy and similar events in developing countries lead us to think how businesses especially in the developing countries where wage rates and productivity are low can operate if minimum wage is suddenly increased threefold and why...
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...The Business of the Minimum Wage • Quantity demanded of employees decreases when quantity supplied of potential employees increases, as minimum wage increases from $7.25 to $10.10. • The green dot shows original equilibrium, when minimum wage was at $7.25. Raising Minimum Wage: WHO GAINS •Government receives higher income tax due to increase in wages. •Low income families are likely to receive more positive impact from new increase wages. WHO LOSES •Potential workers may face potentially unemployment since now employers may not hire as many employees due to increased wage expenses. •Consumers ends up paying a high price for goods and services. •Job market will shrink due to employers reacting to increased wage expenses. DIFFERENCE •Inflation rate will increase. IN IMPACT ASSESSMENT •Pros: To stimulate employers competition and to reduce lower labor turnover •Cons: The positive impacts of a new minimum wage is short-lived since costs and prices will react to this change. Wage => Cost => End Price IS RAISING MINIMUM WAGE A GOOD IDEA? No, because the consequences outweigh the benefits. At first glance, the benefits are positive, but are in fact superficial. In the long-run, the positive impacts are minimal. Bibliography • Romer, C.D., March 2, 2013. The Business of the Minimum Wage. The New York Times, Retrieved from http://www.nytimes.com/2013/03/03/business/theminimum-wage-employment-and-incomedistribution.html?pagewanted=all&_r=0 • “Los...
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...No Economist would disagree that when you raise the minimum wage, you kill jobs for the poor. The debate to raise minimum wage has lasted for years. While it is true that the minimum wage has not kept up with inflation, that is unimportant when looking at the grand scheme of how it would affect the economy. Raising the minimum wage would cause catastrophic issues for the United States economy. The federal minimum wage should not be raised because it will hurt small businesses and increase unemployment. Raising the minimum wage will kill small businesses. Small businesses will have to raise all hourly rates, resulting in less money in the owner's pockets and the employees alike. Many employees would be laid off or have hours reduced,...
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...KEVIN RYEN Micro Economics Minimum Wage State the purpose of this legal price, assess its impact on the market for labor, and evaluate the extent to which it achieves its purpose? The minimum wage is the lowest rate at which a worker can be played. There she minimum wage laws pegged to hourly, daily and even monthly rates, although U.S. law is pegged to an hourly wage. Also, a minimum wage law usually makes it illegal for a person to sell his labor for less than the minimum wage rate The general purpose of the minimum wage is to guarantee a living wage to all workers who work a standard period of time, whatever that might be. In theory, any labor who works 40 houses a week on minimum wage should be at or above the poverty level line. However, the minimum wage has not kept up pace with the inflation in the United States, and the cost of living increases more than the wage increases that are given and that way behind the standards Minimum wage laws were first started in Australia and New Zealand in the 1890s.The first minimum wage to be law was in Massachusetts in the 1912, but it only applied to children and women. The federal minimum wage was established in 1938, by the Fair Labor Standards Act. Initially set at 25 cents 0.an hour, the wage has been raised periodically to reflect changes in inflation and productivity. That minimum wage often involve protracted political battles,” Did you know that one in five...
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