Minimum Wage Dilemma Essay Example

The minimum wage dilemma is one of the most debated topics of economics to date. The lowest hourly wage the federal government allows as of right now is $7.25 (Department of Labor, 2009). Many states have different minimum wage regulations, the highest minimum wage in the United States lies in Washington with a minimum wage of $13.69 per hour. Two states tie for the lowest minimum wage at $5.15 an hour, which actually is lower than the federal minimum wage. There are many changes that will result from raising the minimum wage, even if it’s seemingly unimportant at first. In this paper, we will be discussing and diving deep into some of the consequences of change, whether good or bad.

There is a lot to carefully consider, first we will address the benefits and reasons why one would want to raise the minimum wage. There is an argument saying that raising the minimum wage would unintentionally cause unemployment in the middle and upper class; they would leave their jobs due to unfair pay. According to Silvia Mărginean and Alina Ştefania Chenic during an awful recession, “minimum wage increases do not appear to have a particularly strong effect in reducing employment within the sector of the economy most likely to be affected by the minimum wage.” (Silvia Mărginean and Alina Ştefania Chenic, 98) The paper goes on to explain that raising wages is essentially acceptable at any time, even in a recession there is no excuse to wait for the economy to restabilize. This shows the potential usefulness of raising the minimum wage by pulling people out of poverty and keeping them and their family fed and out of debt.

An important topic our paper needs to engage in is the living wage. The United States began setting a poverty line in 1960, with the number adjusting for inflation. Meaning if your household brings in a combined income of the yearly poverty line threshold, you are considered in poverty. In a perfect world, a full time employee of any company would get enough money to sustain themselves and a family. However this is not the case, “Meanwhile, the US federal minimum wage has not been regularly increased. There is no formula underlying the minimum wage, and it is only raised by an Act of Congress.” (Social Justice and Growth, 13) Since 1970 until now, the poverty line has been raised every year and the minimum wage has grown at a much slower non parallel rate. From 1980 to 2000 were especially noteworthy years, in comparison to other years after 1960 there is clear and intense negative differentiation between federal minimum and poverty line. This leaves many American families forced to work two jobs or have both parents of a household have to work fulltime, leaving lots of stress and hardship on any adults raising a family with minimum wage paying jobs.

On the side of raising minimum wage the last topic to cover is the inequality of bargaining power. Inequality of bargaining power in this context, is when an employer chooses to simply pay the minimum wage to an employee. They hold all the bargaining power in this context, they decide how much they will pay and the employee chooses to work at the predefined rate. The minimum wage is extremely important in making sure that an American citizen that wants to work is given enough pay that it is similar enough to other American citizens that also want to or do already work. It adds a degree of fairness and equality to our economy, bringing considered low-tier jobs up to a certain standard of pay and thus power. “Therefore, mandating a higher wage brings us closer to a world of fairness.” (Levin-Waldman, Oren M, 175) By raising the minimum wage, the economy is argued to become more stable on the idea that the labor market can become more competitive and balanced.

To the contrary, in order to make a persuasive argument, going over the counter arguments to raising the minimum wage is essential. There are two topics to pursue in this paragraph. First, many citizens argue that raising the minimum wage will not directly decrease poverty. This is due to the fact that not all raised income will go to the poor. “The minimum wage is a relatively blunt anti-poverty policy as it may raise wages for people not in poverty such as suburban teenagers who live in a middle- or high-income household” (Biondi, Joel, 9)

Arguing that because the money does not specifically target those under the poverty line, by raising minimum wages there is a negated effect on purchasing power, in-turn not solving the problem. The second extremely popular topic of discussion is that minimum wage increases cause direct inflation to the economy and the value of the U.S. dollar. One of the biggest factors that stumps economists is how to find a balance. Often you see in businesses with majority minimum wage workers, the business will warn that the cost of labor will be passed on down into our product/services price. “If minimum wage increases result in an increase in the aggregate price level, then the inflationary effects would erode some of the purchasing power of both those receiving raises and everyone else in the economy.” (Biondi, Joel, 9)

CONCLUSION

The purchasing power of the United States dollar controls the quality of life of many people, it is especially important to those who live in poverty and struggle to sustain themselves. In this paper, the discussion of minimum wage is brought to light on the side of raising wages, these points were brought up. Raising the minimum is not expected to have a substantial effect on the unemployment rate in the United States. Even during extreme financial recessions, there is no devalue in labor of those living under the poverty line. The federal minimum wage yearly income has been lower than the poverty line since 1970. This requires many households living under the poverty line to have two minimum wage workers full time in order to make enough to pay bills and put food on the table. The means of living wage is extremely important and a staple of our economy. Without a minimum wage our economy could become unfair and unbalanced as employers typically hold Inequality of bargaining power; they have more control over the labor market than workers do. While contradictory, raising the minimum wage needs to be done with caution and gradually all guided by a system of checks and balances. If raising the minimum wage becomes out of control, it may end up unbalancing our economy by giving teenagers from middle and upper class households too much purchasing power. As well as, bringing to focus that if raising minimum wage is done too quickly and abruptly, or done in the wrong cities or states, inflation will certainly occur. The purchasing power of the United States Dollar is the most important to our economy. Change to the minimum wage can and should be made occasionally. However, it must be done with careful consideration to reduce potential damage to the economy so it does not do the opposite of its intended purpose.

Works Cited

Department of Labor. “Minimum Wage.” Dol.Gov, www.dol.gov/agencies/whd/minimum-wage. Accessed 15 Feb. 2022.

Mărginean, S. and Chenic, A., 2013. Effects of Raising Minimum Wage: Theory, Evidence and Future Challenges.

https://www.sciencedirect.com/science/article/pii/S2212567113001196

Social Justice and Growth : The Role of the Minimum Wage. International Labour Office, 2012. EBSCOhost,  search-ebscohost-com.services.lib.mtu.edu/login.aspx?direct=true&db=e000xna&AN=471695&site=ehost-live.

Levin-Waldman, Oren M. Restoring the Middle Class through Wage Policy Arguments for a Minimum Wage. 1st ed. 2018. Cham: Springer International Publishing, 2018. Print.

Biondi, Joel. The U.S. Minimum Wage : Issues and Potential Effects of an Increase. New York: Novinka, 2014. Print.