Minimum wage is a critical laborstandard meant to ensure a fair wage for low paid workers. Minimum wageaffects workers and the economy. According to David Cooper, senior economicanalyst, the minimum wage was then established to prevent exploitation. Thefederal minimum wage is to keep the cost of labor fair enough for people tomake a living. Even today minimum wage is barely allowing workers to have agood income for their families thus relying on government aid.
The growth inthe income of the United States has been very unequal. In fact, it leaves manyworkers behind on an economic level. The thoughts of raising the minimum wagecan help people in the work force providefor their families, but a drastic change in increased pay can impact theeconomy in a negative way. In1938, the Fair Labor Standards Act was passed. This allowed the United Statesto set minimum wage at $0.
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25 per hour.That is only one-fourth of our economy’s dollar. This price in that time was the bare minimum requirement for workerscompensation. As the economy progressedhowever, the federal minimum wage periodically rose but it wasn’t until 2009that the federal minimum wage was set $7.25 per hour by the Department of Labor.The federal minimum wage is also known as a mandatory price floor, without one,employers would continue to pay workers less and less ultimately destroyingconsumer purchasing power.
The minimum wage then helps mitigate that imbalanceof power between employers and low-wage workers (Talent Economy). The federalminimum wage is mandatory for all of the states in the United States, but itcan be raised at higher rates at the states. For example, New York City willhave a $15-per-hour wage by 2018. Thewage of the economy has a price floor but seemingly no price ceiling whichcauses a huge amount of inequality in the U.S and even the nation. People in the U.
S arestarting to advocate for a higher minimum wage because the current wage flooris not meeting the cost of living. People want the wage to be a fair cost to astandard way of living. Since minimum wage is so low the average person mayhave two or three jobs just to provide for the cost of living. This excludespurchasing goods for the household. “Part of the problem is that we’ve let theminimum wage erode for so long that that gap has grown substantially such thatnow it’s hard to even consider bringing the federal wage floor up to a levelthat would allow someone to have a decent quality of life wherever they maylive” (Cooper-Talent Economy). Minimum wage doesn’t keep up with the growth ofinflation and it is becoming powerless. Workers today have to have a high levelof education so that are not affected bythe inequalities of pay in the economy. Jobs of the 21st century arenow requiring that workers should have a Bachelor’s degree or better to make afair salary.
One reason behind this idea is because of technological growth ofour economy. Theeconomic growth in the United States has been impacted by the use oftechnology. Technology drives our economy. Its growth has not only impactedjobs but also was the cause to more,productivity and innovation. In turn,GDP would elevate due to the evolution of technology. In the long run wouldeither raise employment or cause unemployment, causingeven more inequality in the work force. The gap between the rich and poorwill become much larger because of the growth in technology in the economy.
According to the article in Market Module, “The growth of technology hassuccessfully managed to increase economic growth for nations by raisingproductivity, efficiency and output levels, paradoxically at the cost ofhampering employment opportunities within specific sectors.” With growthin technology moving at a fast pace, the demand for untrained worker will decrease causing them to find work elsewhereor having to retrain in order to get their jobs back. The labor force isflexible but limited when technology is involve. The reason why jobs nowrequire workers to be efficient with basic computers functions. Our economy isconstantly growing. Economic growth is an increase in the production of goodsand services from time to time.
It can be measured and adjusted for inflation. This growth is monitored by the GDP,also known as the Growth Domestic Product. It is monitored in quarter systemsand is then averaged out for the total economic growth for the year. Grossdomestic product in the United States represents the total aggregate output ofthe U.S. economy.
With growth in the economy we see an increase in aggregateproductivity. This essential causes more work for workers to ensure that theeconomy stay productive. This helps growthe economy because it grows the labor force because more workers generate moreeconomic goods and services.
The annualgrowth in GDP is the reason minimum wage should also rise. As the economy growsand the minimum wage stays low then it would halt the steady progress in theeconomy we are trying to build and become further behind in economic inflation.Studies have shown that over the past 20 years,annual GDP growth over 2.5% has caused a 0.5% drop in unemployment for everypercentage point over 2.5% (Investopedia). The idea is to increase overallgrowth while lowering the unemployment rate.
But this is not the case extremely lowunemployment rates hurts the economy morethan it makes it better. Too much growthin GDP can cause a major increase ofinflation and corrupt the stock market by making money less valuable. But bymaintaining this rate of growth our economy will not suffer negative sideeffects. By working towards a more full employment, aggregate demand for goodsand services will rise faster than the aggregate supply which causes prices torise. Not only does this happen, but also, many companies will have to raisewages because of a major change in the work force. This increase then affectsconsumers because the companies raise the prices of their products so that theycan maximize profits.
This growth cancause inflation in the economy. Inflation is either an increase in money supply or anincrease in price levels. If the moneysupply increases then the price level will rise. Inflation applies to how theprices of products are doing overall. Inflation is measured by the core Consumer Price Index (CPI),which used in the U.S.
financial markets that also represent the prices paid byconsumers. The Consumer Price Index calculates inflation in the economy. In the United States, the Bureau of Labor Statisticsgathers the average prices paid by consumers for hundreds of different itemseach month. The average is then compared to a reference base period. That baseperiod is an arbitrary date set by the federal government (US InflationCalculator).
The CPI is not the best way tomeasure change but is one way our economy monitors inflation. The main concern is the raising minimum wagewill raise prices that spark the start of inflation. As I said before, raisingthe minimum wage too high can cause high unemployment.
Unemployment is important to the economy andthe market. Everyone wants a job and everyone wants to give payed a little bit more for the work that theydo. People may think the prices are unfair because of the heavy labor. But, isit worth risking the growth of our economy to make a drastic change to minimumwage? I don’t think it is, minimum wage is important for our economy. Ibelieve that the minimum wage should continue to rise with the growth of oureconomy but I don’t agree that minimal wage should spike and cause a majorunemployment crisis is that affects the GDP. Without minimum-wage people inthis world would probably get paid even less than what the federal minimum-wageis seven dollars an hour. The federal minimum wage should be at least $10.50 anhour because of the cost of living.
Many people in the United States do notqualify for government aid because they have a steady job. Having a steady jobdoes not mean you have the means to pay for the cost of living. This is unfairto those who work every day for forty hours a week and still have a hard timepaying for the cost of living which is roughly sixty to seventy percent oftheir paycheck. This leaves them with thirty to forty percent to pay forexpenses, food, clothing, transportation, or even have money left over to savefor future retirement.
Although minimum wage helps the economy I do believe itshould be raised to aid the costs ofliving.