With President Franklin Roosevelt’s cries for “A fair day’s pay for a fair day’s work,” the Fair Labor Standards Act established minimum wage in 1938 (Grossman). Overtime, the minimum wage has been raised in order to account for inflation (BLS 14). However, what the overall economic impact of raising the wage will be is once again a daunting and extensive question. The controversy over raising the minimum wage seems to come from often conflicting economic opinions. While raising the minimum wage is done with good intentions, critics argue that a higher minimum wage will harm those it is actually trying to help.
03 May 2014. Sherk, James. "What Is Minimum Wage: Its History and Effects on the Economy." The Heritage Foundation. N.p., 26 June 2013.
Minimum wage affects all classes and has a large effect on the state of the economy. For these reasons, I propose that minimum wage should be increased to a rate that will adequately provide working families with the funds necessary to survive. Minimum wage was first enacted in 1938 to ensure that workers were maintaining a livable wage. This was mandated under the Fair Labor Standards Act (FLSA) of 1938, which also made sure that workers were free from exploitation and unsatisfactory workplace conditions. At the time of this legislation, minimum wage was set at $0.25 per hour; this equates to approximately $4 in 2013.
While initial reports found a correlation between unemployment and minimum wage, subsequent studies have show no proven relationship. This report focuses on the findings of these later studies . Minimum Wage: The Merriam-Webster dictionary has defined minimum wage as “an amount of money that is the least amount per hour that the workers must be paid according to the law”. Supporters of minimum wage say that it boosts morale of workers, improves their standard of living and reduces inequality and poverty. Opponents of minimum wage claim that minimum wages increases unemployment in low-skilled workers and increases the cost of companies, forcing them to raise prices making their exports uncompetitive.
The minimum wage is a touchy subject in the United States. Many Americans wish for it to be raised, while others believe it should be done away with altogether. Proponents believe that raising the minimum wage will create a ripple effect that will see an increase in wages across the board, and in turn will stimulate the economy as people see increased buying power. Opponents, however, argue that raising the minimum wage will kill jobs, and that lowering or doing away with the minimum wage will result in significant job growth and do away with unemployment (Krugman). Currently, only 21 states have minimum wage laws that exceed the federal minimum.
In fact, servers are twice as likely to use food stamps as the rest of the U.S. workforce and three times as likely to be living in poverty. The main reason for this is the existence of the tipped minimum wage, which since 1991 has stayed set at $2.13 per hour. Not many people even realize that the tipped minimum wage exists, but according to the DOL, servers in 43 states get paid less than the regular minimum wage hourly based on the assumption that the rest of their wages will come from customer tips. In fact, 22 states pay their tipped workers less than $3 per hour. Although tips can often lead to servers making well over regular minimum wage per hour, overall, tips are very inconsistent and are completely dependent on restaurant customers.
(cover story). Nation, 286(13), 20-22. Shierholz, H. (2009). Fix it and forget it: Indexing the minimum wage to growth in average wages. Economic Policy Institute, (briefing paper) 251, 1-24.
While some believe that raising the minimum wage will resolve poverty issues and lack of pay with the signing of legislation, the raising of the minimum wage to $10.10 an hour (as advocated by President Obama and the Democrats) would cause the poverty issue to be worse than it already is; inflation would occur, employees would be laid off, and minimum wage employees would lose welfare benefits, thus offsetting the wage increase. The Government should consider the effects on the American economy as a whole, as opposed to just considering the wage at which certain individuals are paid. While some might argue that raising the minimum wage would provide for a 'living wage', the raising of the minimum wage would result in significant inflation, which, in turn, would increase the cost of living; offsetting any wage increase. According to the Wall Street Journal, economists struggle to agree on whether or not 'wage floors', (e.g. the Federal minimum wage) stimulate, or suppress economic/job growth (Morath).
"Do Minimum Wage Hikes Reduce Employment? State-Level Evidence from the Low-Wage Retail Sector." Journal of Labor Research Summer 1999: 393. EBSCOhost MasterFILE Premier. 22 April 2001 .