Analysis of the Minimum Wage

The discussion about whether or not to raise minimum wage laws has been at an unsurpassed high in the United States. There has been a lot of points made about what good can come to those who are working a minimum paying job, and there has also been points made over the negative effects it could have on other American workers. The purpose of this research paper is to discuss both sides of this discussion together. I will first talk about the brief history and the background of minimum wage policies, next I will talk about the advantages of the two, and then will talk about the disadvantages and in the conclusion, I will wrap the paper up by talking about my own opinion on the topic.

According to BeBusinessed (5) the national minimum wage was created by Congress under the Fair Labor Standards Act (FLSA) in 1938. Congress enacted this legislation under its authority in Article I, Section 8 of the U.S. Constitution (BeBusinessed, 5). FLSA provided minimum wages, overtime pay, and child labor regulations. The intentions for creating the FLSA by President Roosevelt was to help stabilize the economy after the depression and to protect the American worker. When the federal minimum wage first became a law, it was twenty-five cents. Adjusted for inflation, that would be worth $4.19 today. Since the first federal minimum wage, the minimum wage has been raised twenty-two times by twelve different presidents. Since starting minimum wage at twenty-five cents, Americans have seen steady raises in pay. Since 2009 to present the federal minimum wage has been $7.25 an hour. In addition to the federal minimum wage, many states have since passed their own minimum wage laws (BeBusinessed, 5). Arkansas recently voted to increase the state`s current minimum wage of $8.50 an hour to $9.25 on January, 2019; $10 on January, 2020; and $11 on January 2021. The ballot passed with sixty-eight percent (Long, 1).
The discussion about whether or not to raise the minimum wage has caused disagreements among politicians and Americans for years now. Despite the research, everyone is still much divided. Advocates of an increase in the minimum wage make arguments to explain how an increase in the minimum wage would actually help or make an effect on the US economy. The idea of raising minimum wage to fifteen dollars has many people very excited, and has many people upset. Arguments for raising minimum wage fall into two general categories. Rights-based arguments and claims about favorable outcomes. Low wages are seen as a threat to social inclusion, when earning cannot provide for basic social needs, including housing food, and other reasonable needs (Romich, 2017). The plan to raise minimum wage is to balance pay with the cost of living, which ensures minimum wage goes up with inflation.

Favorable outcomes are linked to less poverty and inequality, and greater economic growth. For those who voted against the bill predict job loss or lower rates, and lower economic growth. Economic theory predicts that the demand for a product or service will decrease as its cost increases. This means employers will have fewer workers as workers become more expensive. With a ten percent increase in the minimum wage leads to about one to two percent less employment (Romich, 2017). However, increasing minimum wage creates a bind. It will promote employees to seek more work, but employers are not going to be so willing to hire new employees or possibly keep their current ones. Increasing the minimum wage alone is not likely to substantially reduce poverty or inequality. One recent review of evidence suggests that raising the minimum wage ten percent would cause about a two percent decrease in poverty (qtd. in Romich, 2). While raising minimum wage could potentially cause job losses, it also boosts weekly earnings for low-income employees. Increasing minimum wage in Arkansas would boost the income of an estimated 300,000 employees. Whose annual income would increase by $1,040 on average, which would total to over 455 million dollars statewide (Huizar, 1). Those who voted for Issue 5 have high hopes that raising minimum wage will increase productivity and reduce turnover rates. Experts report that it costs an employer about one-fifth of a worker`s annual salary to replace that worker regardless of the salary paid on the income spectrum (Huizar, 1). By giving employees a high pay rate, employees will be more motivated to stay with that company. Those who also voted to pass this issue believe that raising minimum wage will not cause an impact on job loss. In a 2013 report, the Center for Economic and Policy Research, in part, spotlighted two meta-studies analyzing the extensive research conducted since the early 1900s. Those meta-studies conclude that minimum wage has little or no discernible effect on the employment prospects of low-wage workers (Huizar, 2). Raising minimum wage could potential benefit small business owners, increase consumer spending. It can also save employers money on training cost by reducing employee turnovers. People on both sides of the discussion have valid points that are backed up by data. The minimum wage increase has numerous positive and negative effects on employers, employees as does the idea of not raising the minimum wage. Raising minimum wage would increase employee’s annual salary, giving them the opportunity to move out of the poverty class. However, some jobs may be lost to current employers. Raising the minimum wage benefits a large majority of low-income workers by creating higher earnings and decreasing inequality. Raising minimum wage seems to help only a small portion of the work force, that being the low income workers. It affects the middle and upper class negatively.

I believe that raising minimum wage will weaken the value of the dollar and hurt middle class Americans, which is the greater part of the population. The economy has to remain at the same income-to-cost of living ratio in order for the country to increase economic growth. I believe that raising the minimum wage will ultimately raise the cost of living. The wages being increased will put more money in employee’s pockets, but when the economic cost rises it goes to show that our American currency is worth less than ever before. This will cause inflation in the American society. Many people say it is difficult to make ends meet making minimum wage, but a minimum wage job is an entry level job where there are no degrees or certification requirements in order to be employed. I believe that people should not expect to be able to support a family or make ends meet working an entry level job. Entry level jobs should be paid minimum wage; minimum wage jobs should give you work experience which allow you to establish credibility in the work field in order to further increase your wages. I do not think raising wages is fair to the middle class Americans. As Americans most of us started out making minimum wage and slowly work our way up the ladder in order to further increase our own personal successes. Now that minimum wages are increased means that the middle class will receive the same pay but have to accommodate for the economic increase of cost of living, gas, etc This unfortunately will also cause job loss due to the fact that employers may be unable to pay the increased wages employees have now set. This will create less job opportunities for new employees and less wage increases for the current employers of their occupation. This is not a fix for our country. This could be what drives our country further in the red margin and possibly see another depression era if minimum wage continues to rise.

Work Cited

Be Businessed. 2018, https://bebusinessed.com/history/history-of-minimum-wage/. Accessed 1 Dec. 2018.

Long, Heather. Washington Post. 2018, https://www.google.com/amp/s/www.washingtonpost.com/amphtml/business/2018/11/07/arkansas-just-approved-big-minimum-wage-increase-liberal-victory-red-state/. Accessed 2 Dec 2018.

Huizar, Laura. Raising Minimum Wage to $11 Would Benefit Workers and Small Businesses. National Employment Law Project, 2018, https://www.nelp.org/publication/raising-arkansas-minimum-wage-to-11-would-benefit-workers-and-small-businesses/. Accessed 9 Dec 2018.

Romich, Jennifer. Is Raising the Minimum Wage a Good Idea? Evidence and Implications for Social Work. Social Work, vol. 62, no. 4, 2017, http://0-eds.a.ebscohost.com.library.ualr.edu/eds/pdfviewer/pdfviewer?vid=15&sid=c24e594b-84bc-4458-9086-fdcf964c2941%40sdc-v-sessmgr02

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