Small businesses are hurt by minimum wage hikes. This hypothetical situation describes how the minimum wage kills jobs. Consider a small community clothing store with 50 customers a day for 360 days at $20 spent per customer. Total revenue per year for the business is $360,000. This seems like a lot of money. How could a small hike in minimum wage hurt when the company makes this much money? Well we still need to deduct the costs of doing business. This clothing store has 10 employees all earning minimum wage (for this example is $8 per hour) working 2000 hours a year. This makes labor costs for this small business $160,000. Other expenses incurred by the business are: cost of goods that are sold, licenses, rent / mortgage, utilities, equipment, depreciation, insurance, and miscellaneous supplies come to $150,000 per year, leaving a profit of $50,000 for the owner and his or her family. An increase to the minimum wage of only $1 would raise labor costs by $20,000 (paying more for the same amount of labor) and reduce profit to $30,000. The owner must either reduce his personal expendable income, or raise prices, which in turn reduces the demand for the product, resulting in the loss of a worker or two due to the lower demand. Money for the increase of the minimum wage cost must come from somewhere, either out of the pockets of customers or the owner’s family, and the people who lose their job.
Minimum wage is not the answer to solving poverty. Redistribution of wealth by the federal government can be more effective and less destructive to businesses and low wage employees across this great nation, with the earned income tax credit. The earned income tax credit is a tax credit, direct payment, given to low i...
... middle of paper ...
...ffectiveness." Economic Policy Institute. N.p., 25 Sept. 2013. Web. 03 May 2014.
Mendenhall, Ruby, et al. "The Role Of Earned Income Tax Credit In The Budgets Of Low-Income
Households." Social Service Review 86.3 (2012): 367-400. Business Source Complete. Web. 21 Apr. 2014.
Neumark, David, and William Wascher. "Minimum Wages and Employment: A Review of Evidence from the New Minimum Wage Research." NBER. National Bureau of Economic Research, Nov. 2006. Web. 03 May 2014.
Sherk, James. "What Is Minimum Wage: Its History and Effects on the Economy." The Heritage
Foundation. N.p., 26 June 2013. Web. 01 May 2014.
Stern, Andy, and Carl Camden. "Why We Need to Raise the Minimum Wage." Los Angeles Times. Los
Angeles Times, 10 Mar. 2013. Web. 01 May 2014.
Thies, Clifford F. "THE FIRST MINIMUM WAGE LAWS." Cato.org. Cato Journal, Jan.-Feb. 1991. Web. 2
May 2014.
“Franklin Roosevelt’s 1937 impassioned speech calling on Congress to help the one-third of Americans who were “ill-housed, ill-clad, and ill-nourished” heralded in the Fair Labor Standards Act of 1938 and with it a national minimum wage. Echoes of that speech are still heard today. Senator Edward Kennedy (1989: S14707), in his criticism of the most recent increases in the minimum wage, declared:
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,
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...
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.
Sherk, James. "What Is Minimum Wage: Its History and Effects on the Economy." The Heritage
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.
According to Principles of Macroeconomics by Gregory Mankiw, “The U.S. Congress first instituted a minimum wage with the Fair Labor Standards Act of 1938” (Mankiw 4-119). Minimum wage is used to set a limit of pay employers must pay their employees. Through the years the minimum wage has raised as productivity has raised. The minimum wage has constantly fluctuated and changed multiple times.
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
Armstrong, Ari “Minimum Wage Laws: Economically Harmful Because Immoral,” The Objective Standard. 7 March 2013.
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.
Pyke, Alan. "The Minimum Wage: Myths & Facts." Media Matters for America. N.p., 15 Feb. 2013. Web. 18 May 2014.
Americans are not wrong in thinking that increasing the minimum wage will increase low-wage working families’ incomes, and some of these families will rise above the national poverty threshold. While increasing the minimum wage might benefit some American families, it will hurt others. Increasing the minimum wage will eliminate many low wage jobs, which would then result in many people jobless and therefore, a substantial drop in those individuals’ household incomes (“The Effects of a Minimum-Wage Increase on Employment and Family Income”). . “Raising the country’s minimum wage could boost the incomes of millions of Americans, but it could also potentially cut total employment by hundreds of thousands of workers” (Kurtzleben). An increase in the minimum wage lowers employment, which makes it harder for these workers with minimal skills to find a job. Congress then explains that low income families will actually not bring in any benefits from an increase of the minimum wage (“Would an Increase in the Federal Minimum Wage Help or Hinder Small Business” 2-3). While increasing the minimum wage might raise the standards of living for some low wage workers and families, if the increase in minimum wage reduces employment rates, there is no certain answer on what
A minimum wage is an hourly wage that is established by the government which represents the minimum amount an individual receives per hour. The federal minimum wage was established in 1938 under the “Presidency of Franklin Roosevelt” (Henderson). Currently, majority of the states have their minimum wage less than $10. However, the federal government wants to increase the minimum wage to $12 across the United States. The federal government believes that increasing the minimum wage will assist numerous people in the United States as most individuals are working in a minimum wage job to support their families. About “75.3 million people ages sixteen and over worked for hourly wages in 2008, according to the U.S. Department of Labor’s Bureau of Labor Statistics” (“Minimum Wage”). Meaning almost a quarter of the workforce of this nation are working a minimum wage job. Numerous people believe that these workers are not able to make their ends meet, and increasing the minimum wage will help these individuals substantially. Even though people believe that increasing the minimum wage will benefit the society, they tend to overlook the drawbacks of increasing the minimum wage, and how it will prove to be detrimental for the society.
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...
Many areas could be affected by a change in minimum wage, but potentially the most drastic change would be to unemployment. Advocates of a higher minimum wage insist that a raise would significantly decrease the unemployment rate in the United States and improve the quality of living. However, there are conflicting opinions on this. Higher minimum wage would mean higher labor costs for business owners, thus making it more difficult for employers to maintain the amount of workers they have, let alone add new employees. Raising the minimum wage does not increase the value of the worker's labor; it increases the cost of the worker's labor. As a general rule the more something costs, the less of it people will buy. This is true of not only consumer goods but also of workers in the labor market.Many jobs come from large corporations but they also come from small businesses.There are 23 million small businesses in America, accounting for 54% of sales and 55% of jobs. Raising the minimum wage means that all of these corporations and businesses will have to dig deeper in...