What would happen to your business if the minimum wage were drastically increased? Could you afford it? What impact would it have on those making more than minimum wage? The questions have been debated for sometime, but recently the debate has intensified because President Obama made a proposal to raise the minimum wage to $9 from its current status of $7.25. Bustamante’s article “$9 minimum wage sounds good but it would be bad public policy” focuses on the negative affects implementing a policy to raise the price floor on minimum wage would have on the United States. There are three key principles of economics that Bustamante touches on in the article, the first is people respond to incentives, the second is people face trade-offs, and finally a country’s standard of living depends on its ability to produce goods and services (Mankiw, 2012). After summarizing the article the goal is to identify the impact this policy will have on supply and demand, discuss the changes, and draw the supply and demand graph to detail the change.
Economic Principles
Bustamante argues, that in theory, raising the minimum wage seems like a fantastic idea, because businesses will have to pay workers more. In turn, this should provide workers more of an incentive to work, which would improve unemployment and the supply in the job market (para. 2). Providing higher minimum wage puts a greater amount of money in the workers pocket and allows them to spend more, which should be a positive for business as well. The increase in price for the same amount of skill and service diminishes the profit margin the business was able to make. This imposes a problem for business because they will have a harder time affording to pay workers this amount, which brings ...
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...t have a job previously, creating a surplus of people needing a job. Meaning that the employers are willing to decrease demand, and make less people do more work.
Conclusion
As we see in the graph, when price increases the amount of workers increases, but the employers decreasing the need for employees at that cost. Again this will cause unemployment issues with number of employees needing a job significantly exceeding the number of jobs demanded by employers. Based upon these fundamental aspects of supply and demand as Bustamante suggests raising the minimum wage will have more negative consequences than positive.
References
Bustamante, J. (2013). $9 minimum wage sounds good but it would be bad public policy. Inside
Tucson Business, 22(41), 11.
Mankiw, N.G. (2012). Principles of Macroeconomics. (6th ed.). Mason, OH: South-Western,
Cengage Learning
The common argument takes beginner's level supply and demand graphs and uses them as the basis for the claim. The basic elastic supply and demand graph shows that as the cost of a good increases, demand for that good declines. Thus, if the minimum wage increases, businesses will face higher costs, will pass those costs onto consumers, will suffer lower profits or will reduce employment, or some combination of these negative outcomes. The author here is pointing out that the world is a heck of a lot more complex than that. Microeconomics does not end with the study of rudimentary supply and demand graphs, but incorporates a broader range of considerations into its arguments.
Many people against raising the minimum wage create arguments such as, “it will cause inflation”, or, “ it will result in job loss.” Not only are these arguments terribly untrue, they also cause a sense of panic towards the majority working-class. Since 1938, the federal minimum wage has been increased 22 times. For more than 75 years, real GDP per capita has consistently increased, even when the wage has been
Throughout the decade, a continuous firing debate still remains, whether to raise the minimum wage or keep as it is. People believe that raising the minimum wage can hurt the economy. More will lose jobs than gain. Though all are true, the amount of poverty shown throughout the decades are jaw dropping. That is in fact one of the leading factors. As there is yin and yang, the demand for a higher minimum wage is no coincidence or selfishness as others perceive as is. The poverty shown throughout the decade is deadly prominent. Minimum wage should be raised as people are not gaining enough money compared to the past, despite with more education, too many low quality jobs, “in active” unemployment are outcasted from the statistics, and finding jobs is more difficult than it was decades ago.
The minimum wage has been a policy tool used in the United States since its establishment with the Fair Labor Standards Act in 1938. It has been uses as a tool to remedy some of the effects of poverty by raising the wages of the low wage workers. It has long been the worthy goal of many policy makers to find solutions to alleviate pove...
Gitterman, Daniel P. “Remaking A Bargain: The Political Logic Of The Minimum Wage In The United States.” Poverty And Public Policy 5.1 (2013): 3-36. EconLit. Web. 24 Oct. 2013.
A federal minimum wage was first set in 1938. The first minimum wage was just 25 cents an hour in 1938. Can you imagine surviving off of 25 cents an hour? Now just over 70 years later the federal minimum wage is now 7.25. The question at hand is the federal minimum wage enough to meet the minimum requirement for a good, happy and healthy life? Some states and cities say no. While a select few states and cities have mirrored the federal minimum wage of 7.25, some states have placed their state or city/county minimum wage marginally higher than the federal minimum wage. So why would some states prefer to have a higher level than required by the federal minimum wage when some state have decided to match or even go below the federal minimum wage level. The answer to this question lies within each state city and county and how they perceive the cost of living in the presiding area. Minimum wage needs a makeover in America despite some of the negative effects that may come along with it. This paper will explore the reasons behind federal and state minimum wages and why some of them differ among states counties and cities across America.
Poverty in the United States will keep increasing if Congress does not raise the minimum wage as living expenses continue to rise. With expenses such rent and food, millions of people in the US are struggling to afford the necessities to keep them alive. In order to help the working and middle class, President Barack Obama wants Congress to raise the minimum wage from $7.25 an hour to $9.00 an hour by the end of 2015. Unfortunately, CEO’s and the Republican Party in the US are against raising the minimum wage because it will cut into the companies’ profits and claim that it will cause job losses. There are several benefits in raising the minimum wage, as it reduces the number of people in poverty which in turn reduces the government expenditures to support people living in poverty. Also raising the minimum wage is beneficial to the economy because it creates wage growth which in turn gives people more money to spend. Finally, another benefit in raising the minimum wage is that it would reduce the income inequality gap, as there are many CEO’s in Canada and the US that make millions of dollars every year; while people earning minimum wage are struggling to survive. In the end, Canada and the United States need to raise the minimum wage in order to help people rise above the poverty line which will in turn help grow the economy.
On April 4, 2016, California Governor Jerry Brown signed a bill that would significantly raise the minimum wage for California workers. By 2022, California 's workers will receive a minimum wage of $15 per hour (Kurzweil, Anthony, Sara Welch, and Kareen Wynter). Brown signed this bill because employees cannot live above the poverty line if their minimum wage is not proportional to the cost of living (Scheiber, Noam, and Ian Lovett). The purpose of the minimum wage is to ensure that workers can provide essential amenities for themselves and their families. Many economists have been in a debate about this topic with mixed feelings, whether increasing the minimum wage would be a reasonable legislation or not. For most average American workers, at first, the idea of raising their salaries might make them feel thrilled and optimistic. However, increasing the minimum wage will have its pros and cons effect on the economy. Despite numerous of arguments from both sides, a compromise can be met regarding minimum wage.
There are indeed risks of raising the minimum wage, but the rewards outweigh those risks, so the minimum wage should be raised. Some people who are against this may say ...“But other economists say raising the minimum wage actually hurts the very people it's designed to help: One of the basic laws of economics is that if you raise the price of something, there will be less demand for it. In this case, if you raise the price of workers, the demand for workers will decline. That could mean companies cutting the hours of employees, laying them off, or hiring fewer workers in the future.”... Yes, it could hurt the people it is designed to help, but different states have done this and found the opposite to be true. With America’s still fragile economy we need a boost, a helping hand; And this could be it. So next time you go down to vote on a mayor or maybe even the next president, remember that raising the minimum wage is a good thing, and you should be supporting
Currently, in the United States, the federal minimum wage has been $7.25 for the past six years; however, in 1938 when it first became a law, it was only $0.25. In the United States the federal minimum wage has been raised 22 times since 1938 by a significant amount due to changes in the economy. Minimum wage was created to help America in poverty and consumer power purchasing, but studies have shown that minimum wage increases do not reduce poverty. By increasing the minimum wage, it “will lift some families out of poverty, while other low-skilled workers may lose their jobs, which reduces their income and drops their families into poverty” (Wilson 4). When increasing minimum wage low-skilled, workers living in poor families,
Armstrong, Ari “Minimum Wage Laws: Economically Harmful Because Immoral,” The Objective Standard. 7 March 2013.
Staff, NPR. "Raising Minimum Wage: A Help Or Harm?" NPR. NPR, 8 July 2012. Web. 20 May 2014.
Many critics claim that that raising minimum wage increases unemployment, especially for unskilled workers, and harms small businesses, including grocery stores and restaurants. The argument declares that companies such as these rely mostly on unskilled workers for labor, and if the minimum wage increases, then their profits and, therefore, hiring would decline, creating a...
The increased population leads to a higher unemployment rate and as the number of people who are looking for jobs is increasing, it is more difficult to arrange jobs for all these huge numbers of workers. In this situation the demand for work will be more than the available openings. Emil Malizia, writer of The Influence Of Economic Diversity On Unemployment And Stability says “An unemployment situation continues as long as the demand-supply gap persists” (Malizia). Demand is referring to the quantity, or how much, of a product and it is the amount of a product people are willing to buy at a certain price. Supply is how much the marker can offer for each product and the amount of a certain good producers are willing to supply when receiving a certain price.
These opportunity costs and unintended consequences, offer a counter argument again raising the minimum wage by using the demand and supply model to understand the possible effects of such a