Mimimum Wage (Research Paper Sample)

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Minimum wage
Abstract
The concern of raising the minimum wage has been controversial since the minimum wage law was incepted in 1938. Various oppositions and propositions have emerged regarding the subject. The minimum wage law, which also includes child labor laws, was implemented to protect American workers from poverty and exploitation particularly during tough and unbearable economic times (Belamn & Paul, 401). Even though the law accomplished its purpose at that time, its effectiveness has been questioned over the years because the increase in the minimum wage has produced higher poverty levels and higher employment rates which are contrary to what it was intended to. This forms the sole basis for the controversy around it. A gradual increase in the minimum wage prompts the employers to try to eliminate those employees or workers who are not capable of working up to the current level of minimum wage and hire the ones who are better-skilled hence capable of working up to the wages they are paid. An increase in this minimum wage usually leads to an increase in poverty and unemployment among certain population, particularly the less skilled or unskilled (Berry, 167). Entire elimination of the minimum wage law does not solve the problem, however, the minimum wage should be left at its current level for some few years because it might motivate or inspire the minimum wage earners to work extra hard to protect their financial future.
Introduction
The first federal minimum wage law was signed into effect in 1938 by President Franklin D. Roosevelt. The law was part of a larger bill referred to as Fair Labor Standards Act. The law, Minimum wage, was formulated to protect employees from being exploited. It aimed at ensuring that they are paid a fair wage for the services they render. The law ensured safe working conditions for the workers, guaranteed a fair pay for the workers and covered issues related to child labor. The law regarding minimum-wage was created on the assumption that if employers are forced to pay their workers a mandatory minimum salary, American’s standard of living will be raised, and poverty would be eliminated. However, increasing the minimum wage has resulted to negative effects on the society contrary to the expectations (Blank, 69).
Proponents’ views
A good number of employees or workers, especially the less skilled ones face abusive exploitations. They work for repetitive and backbreaking low paying jobs both at daytime and at night. They feel very exhausted after finishing their respective jobs because they lost most of their time and energy for just a few dollars. These poor people always face bad situations in their struggle to sustain the life and well-being of their families. The best way to safeguard them from this brutal, shameless and direct exploitation is to increase the minimum wage (Blaug et al 337).
By applying the minimum wage law, the government can compel a wealth distribution among the employers or owners who have high standards of living and their lowest level workers. The federal minimum wage is usually increased overtime and is adjusted for a higher cost of living due to accumulated inflation. This gradual increase in the minimum wage is capable of helping the poor, especially less skilled ones, by substantial amount. For instance, a 75-cent per hour raise in the minimum wage results to additional $1,500 for a full-time minimum wage earner. According to Bureau of Labor Statistics, this is the amount an average family expends on groceries in six months. This funding injection is, therefore, greatly helpful to a minimum wage worker. A rise in the minimum wage is undoubtedly very favorable for low waged workers even though their current wage might be well above the minimum wage. However, the lowest wages are the ones affected the most by the increase in the minimum wage (Díaz and Nancy, 104).
People respond to incentives. Imposing higher minimum wage give workers a stronger incentive, as a result of this, people have a stronger effort to work. In other words, imposing higher wages generates higher profits for the employees. Even though this opinion or theory sounds too good to be true, it was proofed by Henry Ford when he opened his famous car factory. Avery generous wage in his time, he recorded one of the supreme successes in the history. The theory implies that the minimum wage presents a win-win situation to eliminate poverty (Crettaz, 120)
Another advantage of minimum wage is that it offers job security. During a weak economy, employees or workers who have minimum wage jobs tend to benefit more because they are at the lower edge of the pay scale. Part time workers who make minimum wage should be given a full-time opportunity by the employer because they can assist them save the cost of employing and training new workers.
Negative effects
Increases in the minimum wage also create negative effects to the employers as well as to the employees. It results to significant impacts on the employer’s business because it is a national economic policy that is responsible for their business decisions. Although advocates for the law point to the requirement of providing a fair hourly wage to all the employees, opponents cite numerous major problems regarding the minimum wage system. Increases in minimum wage results to increase in payroll expense thereby forcing employers to raise the prices of their goods or services or reduce business costs. Since consumers may react negatively to price increases, employers are forced to lay off their employees in return. On the other hand, minimum wage increases may also present negative situations for workers. Wage increases push their annual income into higher tax brackets which impose higher marginal tax rate on them. Since minimum wage workers have lesser wealth than other people in the economic marketplace, increase in tax liability swiftly erodes their wealth. Their immediate income is, therefore, reduced as a result of this high payroll taxes.
An increase in the minimum wage level by the government often distorts the free market economies. Free market economies are typically driven by the economic theory of demand and supply (Block et al 147). The available labor supply fills. Their labor demands in the economic marketplace. The parties’ then assents to specific wage level for the service provided. Minimum wage laws, therefore, create higher wages that the companies cannot pay for the specific services of the employees thereby distorting the free market economies. A substantial increase in the level of minimum wage is capable of driving companies into risky financial situations because most of the businesses, for instance, hotels, fast food restaurants, retail stores and other similar industries regularly rely on these minimum wage workers to complete many business tasks. A continuous demand by governments to increase the minimum wage requires such businesses to pay more amount of money for an equal amount of employee service. Companies that fail to increase their prices or reduce their expenses are, therefore, faced with bankruptcy or liquidation due to this wage increase.
Reduced training opportunities
Proponents of minimum wage laws argue that it pools low-income, and low-skilled workers into an artificially high flow thus removing opportunities to gain knowledge of new skills that may enable them advance in their jobs or trade. Liebler said in a 1995 study that, "Instead of raising their income, the actual effect of the law is to cut off the bottom few rungs of the employment ladder, rendering it harder for low-skilled workers to achieve moderate-paying jobs,". Pooling all low-wage workers into a single wage bracket denies developing employees an opportunity to receive crucial training since the jobs or tasks will apparently go to individuals who can already carry out the work without training. Thus, wage laws reduce training opportunities because the developing employees will benefit from fewer advancement opportunities (Flinn, 132).
Effect on minorities
Some proponents suggest that an increase in the minimum wage can harm the same minority populations they were intended to support. Liebler says “low-productivity workers tend to belong to the minority groups that the law was designed to aid. Their lower ability to produce stems from differences in education, culture, motivational background, breakdown of the family unit, etc. Comparatively, the productivity of young whites is higher than that of the average minority youth." According to Liebler’s analysis, employers are more probable to employ white youth when they are deprived of the option of paying a little less for a somewhat less productive minority employee because white youth out-produce them (Kau, 27).
Statistical data exhibits a strong trend that this group of teenage workers is mostly influenced by the level of the minimum wage. Typical study discovers that a ten percent rise in the level of minimum wage reduces teenage employment between one and three percent. The increase in minimum wage pushes more teens acquire jobs where they work on full-time or part-time basis. The teens are forced to reduce their studying time to perform these jobs effectively. In most circumstances the students are forced to quit school. The society as a whole is disadvantaged by the high dropout rate among college students or high school students in the long term as a result of enhanced wage (Mankiw, 145).
How Increasing the Minimum Wage affects Unemployment
Raising the minimum wage has a very intense effect on the unemployment. Some economist proposes that this minimum wage tends to inflict a wage floor that reduces the pool of low-wage jobs since the wage floor impos...