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Negative effects of raising the minimum wage
The effects of raising the minimum wage
Negative effects of raising the minimum wage
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Poverty is a huge problem in America that has been around forever. There is also the problem of the minimum wage, and how it relates to poverty, that has been studied by many researchers. According to the U.S. Census Bureau in 2015, 13.5% of Americans suffer in poverty, and the average annual salary of minimum wage workers is $15,080, which is right below the poverty line for two or more person families (David Cooper 1). This brings us to the question, will raising minimum wage reduce poverty? Raising the federal minimum wage would fail to reduce poverty because according to research, most benefits of raising it would not go to those in poverty, unemployment would rise, and business would be hurt and forced to raise their prices. Raising the …show more content…
A minimum wage raise from $7.25 to $9.50 was estimated to benefit only 10.6% of the working poor, and nearly 60% of those with incomes over twice the poverty line (Sabia 18). Carlos Ramirez says in his paper The Effect of Minimum Wage on Poverty, “The CBO estimates that only 19% of the $31 billion increase in real wages in a week would fall into the hands of low-income families which amounts to a reduction of people under the poverty line by 900 thousand. This is an improvement of roughly 2% for poverty while the increase in minimum wage was 30-40%” (4). Similarly, David Neumark says in his article Reducing Poverty via Minimum Wages, Alternatives, If wages were simply raised to $10.10 with no changes to the number of jobs or hours, only 18% of the total increase in income would go to poor families” (3). Workers who would benefit from any minimum wage raise are less likely to be poor. In fact, only 19% of those in poverty work at all (Stevens 1). The general conclusion from this research is that there is no statistically significant relationship between raising the minimum wage and reducing poverty (Neumark …show more content…
As explained by George Reisman, “The higher wages are, the higher costs of production are, the higher prices are. The higher prices are, the smaller quantity of goods and services demanded and the number of workers employed in reducing them” (Minimum Wage 3). Business owners would be required to raise prices, and even have to go through the hassle of employing new people. 24% of minimum wage workers are teenagers and many businesses said that if wages were raised, they wouldn’t be willing to pay those high wages to unskilled workers (Minimum Wage 5). 60% of small-business owners claimed that raising the minimum wage would hurt most small-businesses (Minimum Wage 4). Jamie Richardson, vice president of fast food chain White castle, said “The company would be forced to close almost half its stores and let go thousands of workers if the federal minimum wage were raised to $15” (4). Raising the minimum wage to even just $15 in fast food restaurants would increase prices by 4.3%, or a reduction in size between 12% and 70% (Minimum Wage 5). Clearly, raising the minimum wage is not the way to reduce poverty, and it would be detrimental to many business owners all over the
Poverty continues to grow in America. The average minimum wage in the United States is $7.35 an hour- far too low in today’s society. Key expenses, for example, gas and housing prices, have gone up significantly since the minimum wage was last changed in 2007 (Wagner 52). The laws creating the minimum wage were intended to improve the standard of living and decrease poverty. Raising minimum wage is a vital step in decreasing poverty and giving every family the opportunity to survive and succeed. Millions of hard-working Americans are below the poverty line and need an increase in pay. Minimum wage must be raised because it will diminish poverty and assist the working class to support their families.
“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:
Understanding how the minimum wage level functions to affect poverty in a given society is crucial for informing policy in a number of important areas. Indeed, examining the link between poverty and the minimum wage is necessary for policy-makers working to establish sound economic policy as well as labour and social advocacy groups seeking to ensure the minimum wage is at a level sufficient to ensure workers can meet their most basic and fundamental needs. Readers should be concerned with the link between the minimum wage and levels of poverty because poverty is a particularly significant and impactful social issue. High rates of poverty can both negatively impact the economy, as well as contribute to a host of negative social issues. At the same time, there may be questions regarding the impacts to poverty associated with the minimum wage. Research which better clarifies this link is particularly important. For these reasons, investigating the link between the minimum wage and poverty is essential. This essay will provide a summary of two academic journal articles investigating the link between poverty and the minimum wage. Each summary will discuss the particular focus of researchers, the contribution of the study, the methodology employed by researchers, as well as their findings and conclusions. Finally, the essay will conclude with a brief commentary regarding the relevance of these articles to the larger topic, as well as their effectiveness in promoting learning.
Imagine a world where you are working overtime, seven days a week, yet your kids are starving. You can’t get the education you need because you don’t have the time and money to afford it, and you can’t change jobs because this is the only one you can get. Unfortunately, this is the reality for millions of Americans living today. The federal minimum wage is too low to help families, and actually mathematically speaking, too low to survive on. The quality of life for minimum wage families is terribly low, and that is unacceptable. As humans, we should be looking after others and helping the poverty come out of their continuous cycle. Raising the minimum wage would not only help families be able to afford a better quality of life, but help them to afford healthy food, get an adequate education, and invest in the necessary health care they need.
The United States has maintained a minimum wage which was enacted since 1938. At the present time there is much political debate in regarding to increase the minimum wage to levels at the federal level, state, and local levels of government across this country. There are various theories regarding the minimum wage. Some believe it would circulate money into the economy faster which would negate and negative effects on employment, or even improve unemployment rates. Others point to the economic theory of supply and demand, and claim it will increase the unemployment rate. Both of these are simply theories and must be shown to have real life implications. Are moderate increases in the minimum wage above the equilibrium market rate an effective policy tool in combating poverty? We can test this by comparing the unemployment rates of states without minimum wages above the federal level to those who do have state minimum wages above. Also something that has not been previously looked at is the minimum wages effects on the underemployment rates. I have found that these moderate increases of the minimum wage do not seem to have an adverse effect on the unemployment rates in the states that have adopted them. They may even have beneficial effects on unemployment rates. However they may have a small effect on underemployment rates. Also I will survey low-income individuals to see how it impacted their lives.
Minimum wage is a difficult number to decide on because it affects different income earning citizens in different ways. According to Principles of Microeconomics, by N. Gregory Mankiw, minimum wage is a law that establishes the lowest price for labor that and employer may pay (Mankiw 6-1b). Currently, the minimum wage in the United States is $7.25 per hour. For many years politicians and citizens have argued on what should be the minimum wage that would benefit the economy and society in general. A minimum wage was first established in 1938 to increase the standard of living of lower class workers. To discuss what is better for the country and its citizens, people have to understand what is a minimum wage and what are its effects.
The minimum wage today has a lot of issues; some people say it is not enough to live comfortably. Many agree that there needs to be an increase in minimum wages and by doing that it can help with our issues of poverty. Statistics show that a worker who is full time and earning minimum wage makes only $15,080 a year, which is under the federal poverty line for a family of two. (Gitis, 2013) The problem with that is $15,080 is not a sufficient amount that a person can live and grow on. “A family of two can consist of a mother and son or daughter, father and son or ...
Some think that the minimum wage should not be raised, but others think that the minimum wage should be raised. If one had to be chosen, raising the minimum wage would be better. The minimum wage should be raised because if you were to work full time on minimum wage, you are below the poverty line; Also states that did raise the minimum wage above the federal standard have had more job growth than states that did not. Finally, "Minimum wage workers are much more likely to immediately go out and spend that extra money in the economy," says Heidi Shierholz of the Economic Policy Institute, which favors raising the minimum. "That's because they're often living paycheck to paycheck."
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,
Many reasons contribute to the increase of minimum wage and how it can affect people and how they can react to the minimum wage if it is not raised according to many economists of us news. Many different things are very complex when it comes to the minimum wage because of how hard it is to raise and how it will benefit people in many different ways and how it could seriously hurt many people.Raising the minimum wage would also not stop the crime rate of how many people steal because they aren’t getting enough at their job that crime won’t go down because people will still think they will need to steal no matter what To also increase the minimum wage many companies would have to increase the unemployment rate because a lot of people would be
Government must provide a floor against poverty by providing an adequate minimum wage. The essential role of the government is to have the people's best interest in mind and one way to do that is combating poverty. Although there are many solutions when it comes to tackling poverty, one ideal solution is raising the minimum wage since that will benefit majority of the population. Infact by raising the minimum wage it will cause a positive cycle of economical benefits for small and large business globally. For instances, when working class families benefit from a raise in their wages they are able to contribute back to the market by having extra money to spend on goods that they normally can not afford. Buying these goods equal the need for
Raising the minimum wage will not solve the poverty problem and will in fact distract our leaders from focusing on solving the issue in substantive, creative, and productive manner. Throwing more money at poor people does not solve their financial problems. Better education and better jobs
The fact that the number of people who live in poverty around the world has been decreasing since the 1990s is made even more remarkable by the fact that the United States is experiencing increasing poverty levels, according to the U.S. Bureau of Labor Statistics. In 2007 through 2009, the poverty status of persons in the labor force for 27 weeks or more increased each year; in 2007 the number was 146,567 and in 2008 was 147,838 whereas in 2009 it was 147, 902. If the situation of poverty in America, the world’s most advanced economic nation in terms of development, is rising, the situation in third-world countries must be even more dire. According to Macroeconomics by Andre B. Abel, there are 6.4 billion people in the world
A study found that raising the minimum wage “for low-income individuals reduce crime by providing viable and sustainable employment and the raise will decrease crime by 3 to 5 percent.” (Minimum Wage) The reason why raising the minimum wage would decrease crime is because people in poverty are linked to higher crime rates as said by researchers. In addition, children who live in poverty will benefit from the raise because they will be more present in school and their chances of dropping out of high school will decrease. Children who live in poverty are more likely to drop out of high school or miss more school days than children who are not in poverty. Raising the minimum wage will help parents not be in poverty with their children and to be less at risk of the results that poverty brings. (Minimum
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...