Minimum Wage and its Impact

Minimum Wage and Its Impact: An Argument for Increasing the Federal Minimum Wage Since the Industrial Era, workers in North Carolina and across the US have fought for better working conditions, less hours, no child labor, and most importantly a wage that could support life in the United States. Throughout the years, many of the state and federal governments have passed legislation to increase the minimum wage, decrease working hours, and to prevent child labor. While some states make advances in Worker’s Rights, other states especially in the South have fallen behind (Editorial Board, 2018). Currently, North Carolina has a wage ceiling at $7.25 while the prices of all goods have risen significantly in the twenty-first century (Editorial Board, 2018). The low minimum wages effect many groups such as the impoverished, the working class, business owners, and college students. With inflation of college tuition and the cost of living, business owners should adjust wages to the economy at the time. College students are some of the people hit the worst due to the continuing exponential increase in college tuition payments (Kantrowitz, 2002). Some of the most evident changes in inflation can be seen by looking the tuition for colleges for residents of North Carolina. In 2008 the tuition at UNC Chapel Hill was $3,705 and has increased to its current value of $6,882.

Out of state tuition went from $20,603 to $31,963 (Fish, Annual Tuition and Fees at UNC). During the start of the twenty-first century tuition fees for UNC students was $2,768 a year. In the last 18 years the price has risen to $8,835. The tuition cost rose almost three times higher while the NC minimum wage has been a stagnant $7.25 an hour (Fish, 2017). From 2008 to 2018 most college students are paid the minimum wage, which has not changed in ten years and is still at $7.25 an hour while college tuition prices have almost doubled (United States Inflation Rate). Colleges also do not have a ground to justify higher prices due to inflation in the economy. In the 2017-2018 economic year, inflation never even rose to 3%. In fact, it has stayed at lows dropping to 2.3% in September 2018 (United States Inflation Rate, 2017-2018). While inflation stayed below 3% for the last economic year, some colleges have increased their tuition as much as 26% (Kantrowitz, 2002). College tuition also has increased faster than the average disposable family income of the working class. As much as 85% of people cannot pay for college without financial aid. Knowing this, it is almost impossible for impoverish families to pay for their children’s colleges. For students who must pay for their own college making only $7.25 an hour, it is almost impossible. There is also a correlation showing that students that work part time end up with lower grades due to time constraints (Kantrowitz, 2002).

For colleges, raising tuition prices also will not help their profit margins. With rising prices, more students are receiving financial aid from colleges. This is a serious problem for colleges, eventually they will reach a point of diminishing returns. When as many as 80% of college students are on financial aid colleges only net 25 cents per student for each tuition rise. Kantrowitz found that, Increases in public college tuition are strongly correlated with the declines in state support of higher education (2002). This is due to the debt that the government will go into providing FAFSA for college students. Many students at state schools now have claimed bankruptcy and are not able to pay back student loan amounts as high as $100,000 (Kantrowitz, 2002) The impoverished are also heavily burdened by the minimum wage in North Carolina. Since the 1800’s, North Carolina has grown to be an industrial hub, but has never had a great stigma when it comes to worker’s rights. The Last Ballad, a book written by Wiley Cash, takes place in 1920’s North Carolina, where working rights and the minimum wage were still huge problems. In the Last Ballad, the town of Stumptown is poverty stricken and the workers cannot make a living. They work crazy long hours and in return they are payed a menial $9 a week. The labor union’s main goal was to raise wages (Cash 2017). Ella May Wiggins, the main character in the book is barely able to keep her kids alive during this time. In Chapter 10, Cash states, The cabin’s door bust open, and a tribe of dirty children poured onto the porch The three children were frighteningly thin, all angles and sharp edges. (Cash, 2017, p. 277). Cash also said, Hampton was shocked by the poverty before him He’d actually expected to find poor Negroes living hand to mouth, barely getting by on what they could earn, save, or grow, but he hadn’t expected to find white people living this way (Cash, 2017, p. 277). In the book, Ella worked seventy-two hours to receive nine dollars (Cash, 2017, p.14). This issue of low wages is still prevalent today, and while we as a nation have come a long way, wages have not changed. Raising the minimum wage is a poverty deterrent, yet is beneficial to all groups if done correctly.

More conservative groups argue that in order to make up for the minimum wage employers will perform massive lay-offs to make up for the profit margins. Another counter argument commonly used is that teens could be fired from jobs, and health insurance and other benefits from the company might be reduced. On the more liberal side, they argue the minimum wage should be increased to $15.00 nationwide (MaCurdy, 2018). Which if the minimum wage was to be increased from $7.25 to $15.00 layoffs would be necessary. In Waltman’s book, Minimum Wage Policy in Great Britain and the United States, he found that nations with the highest minimum wages, such as Oregon, Washington, and Alaska all are among the states with the highest unemployment rate in the nation (Waltman, 2007). Based off this information, my proposal is the minimum wage should increase according to the economy, but not go below $9.50. With a steady raise to $10 profit margins would not decline to the point of layoffs and companies could still afford to provide benefits to employees (MaCurdy, 2018). The government provides more money on welfare and food stamp programs, for the poor than they could earn working minimum wage jobs. Due to this, many people become dependent on the welfare system. This is very expensive for taxpayers and is very harmful to the middle class. Increasing the minimum wage would promote the poor to work minimum wage jobs. Theoretically, with increased minimum wage poor people could work their way out of poverty decreasing the amount of people on welfare. Furthermore, the government would not have to spend so much on programs which harms business owners, the working class, and the middle class. If the minimum wage was to be increase to ten dollars, businesses might entertain the option of slight increases in costs of products, but this can be disproved.

Studies found that after previous historical increases in federal wages, little or no job losses took place. In the 1990’s, federal minimum wage increased from $4.25 to $5.15 (MaCurdy, 2018). This helped college students, working class workers, and the poor. The economy also did not experience any major shifts during this time. Due to America’s Consumerist Culture many people are willing to spend more, and many might not even pay attention to price increases. This is already done in many places to widen profit margins. Research from the 1990s to current years have projected no negative employment effects. Some other previous studies have also shown that employment would also increase. The idea of employment increasing is very plausible. As mentioned before much of the poor would be motivated to get jobs that pay more than federal programs creating greater increases. Many college students and High School students would also be more inclined to get jobs. In doing so, college and high school students would have greater income helping them pay off college. In doing this, student loan debt would not be as much of a burden, and colleges could lower tuition costs due to the decreased need for financial aid. In 1994, Card and Krueger examined the fast-food employment in New Jersey and Pennsylvania after a wage increase in New Jersey. Card and Krueger concluded, We believe that on average the employment effects of a minimum wage increase are close to zero (MaCurdy 2018). Many economists in the twenty-first century also found similar outputs. While some studies have suggested slight increases in the price of goods, the majority of studies have found an almost zero percent price increase. Lee and O’Roard (1999) found the prices would rise by .3%. Aaronson (2006) found that prices would only increase by approximately 0.07% (MaCurdy 2018). Studies conducted by Katz, Krueger, Machin, Manning, and Rahman found that there would be no practically no increases in costs of goods (Kantrowitz, 2018).

In raising the minimum wage 40% of families at the bottom of the income distribution receive 38.3% of the additional earnings from the minimum wage. In Kantrowitz’s (2018) study, he found that the biggest overall benefit of minimum wage comes from the lower class. Due to decreased taxes on the lower class and college students, they would benefit exponentially from a higher minimum wage (Kantrowitz, 2018). Business owners could also benefit the most from minimum wage increases. In American society, raising the minimum wage is supported by many mainstream news outlets and protests have taken place in the streets of America. More than half of the nation has higher minimum wages than North Carolina. North Carolina in specific is a great state to raise the wage, the state is known as the business hub due to very low tax rates for businesses, very little regulations, and low labor costs. Due to the low tax rates, State Representative Bob Steinburg said, The state and federal tax cuts and strong economy makes this an opportune time to consider a higher state minimum wage. There may be some room to move it (Board 2018). Businesses with higher wages look very attractive and their reputation would be boosted driving more consumers to spend money there. This wave of popularity from news outlets and people could make up for any lost profit. Some companies like Starbucks, Target, Walmart, Amazon, and Lowes Foods have already increased their minimum wage at $8.50 or higher (Board 2018). When looking for jobs these companies will look attractive to possible employees, they will be more motivated to produce at max efficiency, and people would be drawn to buy there to support their cause (Board 2018).

Inversely, Businesses with low wages can lose profit due to the formation of labor unions, and employees striking against companies which severely harms their efficiency and profits (Board 2018). In The Last Ballad, the workers could not survive off of nine dollars an hour which led to the creation of the labor union. Cash stated, Ella knew that the work she did was dirty, dangerous work, knew that the nine dollars she earned for a seventy-two-hour workweek wasn’t worth the work itself (Cash, 2017, p.12). Due to the low wages she joined The Gastonia Local of the National Textile Workers Union, which invited all workers to protest for a $20 Weekly Minimum Wage (Cash, 2017, p.14). These protests that took place in the book severely harmed the productivity of American Mill No. 2, the loss of productivity decreased their profit amount greater than if the minimum wage rose to $20 or $15. This also applies to many strikes that have taken place up to the current years. In 2012, workers at Hostess Inc refused to return to work by a company-imposed deadline. Hostess had to cease operations which included thirty-three bakeries, 5,500 delivery routes, and 570 bakery outlet stores throughout the United States (Ellin and Torres, 2012). In many of North Carolina’s cities, the cost of living is rapidly increasing and has already exceeded the amount that can be supported by the minimum wage. Democrats in the state have already suggested to raise the wage to fifteen dollars by 2022 and thereafter it would be indexed to inflation. This bill was not passed because of $15 being too sharp of an increase but adjusting it to inflation would help millions of people to support this cause (Board 2018). In American society, minimum wage increase is a very controversial issue. With low minimum wages, businesses can look unattractive to work at, the impoverish cannot support themselves due to increased cost of living, and costs of college tuition will rise. With inflation of college tuition and cost of living, business owners should adjust wages to the economy at the time.

References

  1. Board, T. E. (2018, January 6). After tax cuts for the wealthy, it’s time to raise NC’s minimum wage. Retrieved October 29, 2018, from https://www.newsobserver.com/opinion/editorials/article193358219.html
  2. Cash, W. (2017). The last ballad, a novel. New York, NY: HarperCollins. Ellin, A., & Torres, J. (2012, November 19). Hostess, Twinkies: 5 Game-Changing Strikes. Retrieved from https://abcnews.go.com/Business/strikes-shut-companies/story?id=17743234
  3. Fish, C. (2017, March 9). Annual Tuition and Fees at UNC, 1947-2017. Retrieved October 24, 2018, from https://blogs.lib.unc.edu/uarms/index.php/2017/03/annual-tuition-and-fees-at-unc-1947-2017/
  4. Kantrowitz, M. (2002). Causes of faster-than-inflation increases in college tuition.College and University, 78(2), 3-10. Retrieved from http://search.proquest.com.jproxy.lib.ecu.edu/docview/225612640?accountid=10639
  5. Thomas MaCurdy, “How Effective Is the Minimum Wage at Supporting the Poor?,” Journal of Political Economy 123, no. 2 (April 2015): 497-545.https://doi.org/10.1086/679626
  6. United States Inflation Rate 1914-2018 | Data | Chart | Calendar. (n.d.). Retrieved October 24, 2018, from https://tradingeconomics.com/united-states/inflation-cpi
  7. Waltman, J. L. (2007). Minimum wage policy in great britain and the united states. Retrieved from https://ebookcentral.proquest.com
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