The Minimum Wage Should Be Increased

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Congress enacted the federal minimum wage in 1938, during the Great Depression. Congress had two goals; keeping workers away from poverty and boosting consumer spending for economic recovery. Today, there is a debate, whether we should increase the minimum wage again. Increasing the minimum wage is useful for several reasons. First, the current minimum wage has failed to keep up with inflation. Second, a higher income level reduces employee turnover and increases efficiency and ultimately, raising the minimum wage does not reduce employment. Even with high unemployment rates, the minimum wage is useful for the economy.

Today "the federal minimum wage" is $7.25 per hour since July 24, 2009. It has failed to keep up with inflation. The real value of the minimum wage rose steadily from 1938 until its value reached a peak in 1968. Thereafter, it suffered severe erosion as Congress failed to adjust for the inflation over time. The minimum wage of $1.60 an hour in 1968 would be $10.47 today when adjusted for inflation. This means that the purchasing power of the minimum wage has decreased significantly over time. The current minimum wage is no longer enough to protect workers out of poverty. A person who earns the minimum wage and works full-time (40 hours/week, 52 weeks/year) only earns about $12,000 in a year. This is almost $7,000 below the poverty line for a family of three ($19,090) according to the federal poverty guidelines. As a result, the gap between poor and high-income families is continuously increasing, and taxpayers have to pay more for public assistance such as food stamps and Medicaid. Increasing the minimum wage can increase the annual income of low-income families and reduce the public assistance expenditures by g...

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...litical Science, London, UK.

Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania; David Card and Alan B. Krueger, The American Economic Review, Vol. 84, No. 4 (Sep., 1994), pp. 772-793

The Effect of the Minimum Wage on the Fast-Food Industry; Lawrence F. Katz and Alan B. Krueger, Industrial and Labor Relations Review, Vol. 46, No. 1 (Oct., 1992), pp. 6-21

Minimum Wage Effects Across State Borders: Estimates Using Contiguous Counties; Arindrajit Dube, T. William Lester, and Michael Reich, Review of Economics and Statistics (2010) 92:4, 945-964

Do Minimum Wages Really Reduce Teen Employment?; ALLEGRETTO, S. A., DUBE, A. And REICH, M. (2011), Accounting for Heterogeneity and Selectivity in State Panel Data. Industrial Relations: A Journal of Economy and Society, 50: 205–240. doi: 10.1111/j.1468-232X.2011.00634.x

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