HISTORY AND IMPACT OF MINIMUM WAGE VS UNEMPLOYMENT (Essay Sample)

Student's Name Instructor’s Name Course Date Table of Contents TOC \o "1-3" \h \z \u 1.Introduction PAGEREF _Toc449478395 \h 22.History PAGEREF _Toc449478396 \h 23.Current federal minimum wage PAGEREF _Toc449478397 \h 34.Inflation changes PAGEREF _Toc449478398 \h 55.Changes in determining employment impact PAGEREF _Toc449478399 \h 86.Nominal minimum PAGEREF _Toc449478400 \h 117.Conclusion PAGEREF _Toc449478401 \h 12Works Cited PAGEREF _Toc449478402 \h 13 History and Impact of minimum wage vs unemployment 1 Introduction Historically, the question in regards to how the minimum wage impacts employment affects employment is one of the most controversial issues that are still studied. It is an important issue in labor economics, and has tremendous impact on the country’s economy of a country. During the latest world financial downturn, the employment of low skilled or younger workers worsened tremendously. These individuals are often paid a minimum wage. After the recession, the unemployment gap due to lack of education increased. It is essential to have a conclusive understanding of the impact of a minimum wage if it is to be considered among other substitute plans as a means of improving the living conditions for individuals in low-income homesCITATION Dub10 \p 946 \l 1033 (Dube, Lester and Reich 946). There is a link between minimum wage and unemployment, and this essay will seek to consider how they affect each other. 2 History Increasing the minimum wage has been a priority for many leaders and government personnel. However, an issue that often arises is whether improving the minimum wage could lead to loss of jobs. In the US, the minimum wage stands at about $6.9 per hour. Nevertheless, some politicians want this to be increased to about ten dollars an hour. A large number of the citizenry support the raise. State-level increases were approved in Nebraska and Alaska as many of the citizens voted in supportCITATION Bac12 \p 358 \l 1033 (Bachmann, K¨onig and Schaffner 358). Over the years, most of the studies on employment and minimum wage have tried to look at how the lawful wage floor influences the employment level. This can be for either a specific employment subgroup (food service workers or teenagers) or an entire labor force. It can be argued that, based on a matching framework and worker category search, and impact of the minimum age will be more visible in employment dynamics. It means that it would play a role in the development of new job for the economy that is achieved by reduction of existing jobs due to fall of contracting organizations and expansion of organizationsCITATION Bas11 \p 263 \l 1033 (Baskaya and Rubinstein 263). The changes to a new employment within a constant state may be slower than expected. This arises since the impact of the policy will take time to be experienced in the employment level. 3 Current federal minimum wage The minimum wage by the federal government arose from the Fair Labor Standards Act or FLSA that was passed in 1938. This Act is applicable to most of the workers in the private and public sector. However, this law was not applied in many factories at this time, but it gained prominence after 1978. The graph below shows various variables in regards to changes in employment after the minimum wage was raised. Figure 1: History of wage increases Based on figure 1 above, a rise in the federal minimum wage is not followed by a decrease or arises in the national job growth. There is not devastating link between the two variables. For instance, there were 12 months of job growth after the wages increased in 1978. On the other hand, the loss of jobs occurred from 12 months after the 2008 wage increase CITATION All \p 228 \l 1033 (Allegretto, Dube and Reich 228). Furthermore, these wage changes were not unique, and they did not lead to any changes. Specifically, the wage increases in 2007, 2008, and 2009 were characterized with significant job losses. However, this occurred during the financial crisis. On the other hand, the wage increases in the 1990s occurred during an economic boom. Many experts do not agree on the outcome of minimum wage on growth of jobs in the economy. These has some research that has shown that increasing the minimum wage will limit job growth, while other research has come up with a conclusion that the effect is insignificantCITATION Bas11 \p 121 \l 1033 (Baskaya and Rubinstein 121). 4 Inflation changes There is a variety of pragmatic reasons as to why the impact of the minimum wage should be determined through job development rather than occupation levels. An essential issue is that, contrasting many aspects studies in the program analysis work, the common discrepancy is comprised of relatively minimal and provisional changes in a country’s actual minimum wage CITATION All \p 222 \l 1033 (Allegretto, Dube and Reich 222). This will soon be dissipated by a rise in other states and inflation. In this regard, there is lack of sufficient time to establish the extent at which job growth is reflected in the level of employment. Figure 2: Minimum wage changes Figure 3: Minimum wage increases Opponents of an upsurge in minimum wages have stated that is be disadvantageous to the poor. This would arise, as they would lose their jobs as many poor people rely on low pay work. This means that instead of gaining form a wage increase, the minimum wage workers would end up being fired. The employees could be unable to pay the required wages for their employees. This is the same argument in elementary economics. In this context, a perfectly economical market, a rise in the lowest wage would lead to job lossesCITATION Dub10 \p 962 \l 1033 (Dube, Lester and Reich 962). A contentious issue is whether this is indeed a fact. If a rise in the lowest wage will lead to high rates of unemployment as more people are losing their jobs, then there would be a higher unemployment rate among such individuals very quickly after a wage increase. The graphs above detail the reality on the ground. Figure 2 details the accepted federal minimum wage since the 1950. It also details the employment rates of workers and real inflation adjusted terms (using the CPI). The data details information for workers aged 16 to 24 years. Over half of the employees who earn hourly wages are within the 16-24 age group. It is important to consider that the minimum wage, when adjusted in accordance with the inflation rates, is much lower than half a century ago. Moreover, it achieved a high level in February 1968 at about £10.80. The lowest level was $6 in March of 1990 and $5.70 in June 2007. He averages level of $9 for about 25 years was the case in 1957-1981. From the graph, an increase in the minimum wage did not lead to a rise in unemployment rates CITATION All \p 240 \l 1033 (Allegretto, Dube and Reich 240). However, it is difficult to determine a trend in unemployment rates in the months after the rise in the minimum wage that has been the case for over 55 years. The minimum wage leads to a reduction of gross hiring of new employees even though it does not affect the gross separations. Furthermore, the rise in the legal wage floor can have a impact on the employment level, they directly minimize job growthCITATION Fli11 \p 123 \l 1033 (Flinn 123). The result will also detail how the mechanisms of minimum wage have an impact on jobs. This is essential in normative analysis on theoretical models. Due to the politicization of the minimum wage, and the resistance of businesses and conservatives in support of higher rates, the rise in minimum wage has not been frequent or even significant in regards to the percentageCITATION Dub10 \p 962 \l 1033 (Dube, Lester and Reich 962). This can provide an excellent opportunity to determine if the minimum wage increase can lead to a rise in unemployment rates among the low paid workers or young individuals. However, this trend has not been forthcoming. A linkage between the two variables is difficult to determine. This arises from the decrease in unemployment and internet increases that are influenced by macro-conditions. Figure 3 is able to detail the real lowest wage along with a line that describes the portion for the joblessness rate for individuals who are aged between 16 and 24 in comparison to the level of unemployment for the whole labor force. This ratio shows that a large number of minimum wage employees are young. This indicates that a rise in the minimum wage would mean that they would become unemployedCITATION Fli11 \p 134 \l 1033 (Flinn 134). The high number of individuals within the age group would lead to a rise in such ratio. However, the graph does not until such a relationship. Even though the minimum wage has undergone many changes, the rate of unemployment does not vary, and is some cases it moves to a direction that is the opposite of what opposed to rise in the minimum wage would forecast. An exception can be seen on the graph in February 1968 after the increase in the minimum wage CITATION Fli11 \p 47 \l 1033 (Flinn 47). This variation in fact occurs four months later and then goes back. Furthermore, there is a steady decrease in the minimum wage during the 1980s that was followed by a rise in the ratio. 5 Changes in determining employment impact The current literature on lowest wages in vast and longstanding. It is characterized with disagreement on the real effects. Most recent studies use ‘difference-in-differences’ evaluations to determine the result of these policies on occupation levels. It is vital to note that this model seeks to test where there is a discreet change in the level of employment prior and after a change in the level of minimum wagesCITATION Dub10 \p 962 \l 1033 (Dube, Lester and Reich 962). This is also compared with other state(s) employment. Two prob...