Raising the Minimum Wage

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17 March 2016

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There has been a lot of discussion regarding the increase of minimum wage across the nation. Currently, the wage is set at a low amount of $7.25 an hour. In today’s society it is almost impossible to live on only an income of $7.25 an hour especially for those who are raising a family. In President Obama’s 2013 State of the Union Address, the president proposed to raise the minimum wage to 9 dollars by the year 2015 (Luhby). A higher minimum wage would help people living in poverty by providing better means of financial stability, and it would also improve the chances of those people trying to escape poverty stricken living conditions. Another bonus to increasing the minimum wage is that it could potentially help lift the economy back up out of recession. For example, if people have more money, they are more likely to spend more money, therefore creating an increase in revenue for the nation as a whole. An increase in the present minimum wage to $ 9.00 per hour will boost the economy, promote sufficient funds for the standard of living, and enhance equality among all United States citizens.

To fully understand the argument circulating around the minimum wage law, it is first essential to recognize the reasons it was established. In 1937, the United States was still recovering from the Great Depression (Wilson). The Great Depression, a direct result of World War I, was a historical low point in United States’ economy. During this period of time, President Franklin D. Roosevelt endorsed the New Deal, which was a series of economic programs that helped to stimulate the nation’s economy (M.W. Overview). Once the bill was approved by President Roosevelt, Congress began a rigorous deliberation in order to deem the bill as constitutional. Unfortunately, the original document was found unconstitutional, which then caused the proposed bill to be re-evaluated before being enacted into a new law.

After a long debate, policymakers reached an agreement as to what statutes would be included within the updated New Deal’s economic stimulus programs. Among those provisions, the Fair Labor Standards Act (FLSA) of 1938 was instituted because it was believed to protect workers and stimulate the economy simultaneously (M.W. Overview). Meaning that, the federal government was not only concerned with rebuilding the United States’ economy, but they also recognized the importance of financial stability among all citizens. As a result of this recognition, Congress felt the need to implement a program that was specifically designed to protect employees from being over-worked and under-paid. Thus, in 1938 the first minimum wage of $0.25 an hour was enacted as part of the Fair Labor Standards Act (Sherk). This mandated pay rate ensured that workers would not only earn enough to sufficiently support themselves but also enough to support a family. Since the initial implementation of the minimum wage, Congress has decreed several raises in order to maintain an adequate income.

In fact, according to Mark Sherk, author of The Negative Effects of Minimum Wage Laws, the minimum wage has been increased twenty-two times throughout its existence (Sherk). These increases suggest that the United States government recognized that its citizens were being underpaid and therefore adjusted the minimum wage accordingly so that workers would be compensated properly. With that being said, it is obvious that the United States government regulates the minimum wage, however it is also important to recognize that the responsibilities of the minimum wage are divided between different levels of government such as: national, state and local jurisdictions. The United States is operated by a federalist government, meaning that multiple levels of government share power (O’Gorman).

For instance, a popular example of this type of government being exercised is allowing individual states to decide whether or not to legalize marijuana within their borders. This means that while one state may oppose the legalization of marijuana, another separate state may choose to accept marijuana as legal. Consequently, a similar approach applies when dealing with the issue of the minimum wage. The national government mandates a federal minimum wage that all states must adhere too, however states then have the option to implement a minimum wage on top of the federal minimum wage. This means that each individual state has the capability of initiating a higher minimum wage for its own citizens. Once the decision of applying a separate minimum wage has been made by the states, the United States Department of Labor requires that employees must receive the higher wage (Grace). In other words, employers within a state that have two minimum wages, a federal and state minimum wage, are required to pay employees the higher of the two. This policy ensures that employees are at least compensated the federal minimum wage regardless of what a state implements unless the state mandates a higher minimum wage.

In addition to policy enactment, the United States government also has two main economic responsibilities in order to reduce income inequalities among its citizens. According to the article Federalism and American Inequality, the government is economically responsible for development and redistribution (Kelly and Witko). Although the government is responsible for two economic activities, the duties are divided between state and national governments. State governments are in charge of developmental policies so that each state has the power to enact regulations that meet the needs of its individual residents. This can be seen within the American education system, such as allowing each state to decide curriculums for graduating high school. Likewise, the national government is responsible for redistributing funds throughout the nation in order to promote equality among all United States citizens.

A great example for this method is the Social Security program, which is an entitlement program that spreads funds across generations to even out the wealth (O’Gorman). In fact, the Social Security program takes taxes from one group of people and disperses it directly to another group. Despite the United States government’s attempts to ensure all citizens have an equal opportunity in regards to income, unfortunately that is not the case. Studies suggest that an extravagant amount of workers earn either the current minimum wage of $7.25 an hour or less. As a matter of fact, in 2012 about 3.6 million workers fell into this category, which makes up about 4.7% of all hourly paid workers (Minimum Wage Workers). Even though the percentage of workers who fit into this category may seem slow, in reality it is an alarming rate especially since minorities and young people make up most of the population.

As illustrated by the National Employment Law Project, 50% of minimum wage earners are 25 years of age and younger and another 5% of workers were of African American, Hispanic, Latino descent (NELP). That means that nearly 55% of workers who make the federal minimum wage are considered to be a minority across the nation. Another interesting statistic, reported by the Bureau of Labor Statistics, is that about three-fifths of minimum wage workers are employed in some type of service related industry (Minimum Wage Workers). For instance, a lot of food servers, waiters and waitresses, only earn a minimum wage salary of $7.25 or less. However, in these professions, it is expected that employees receive tips from the served consumers. Then after combining the two entities, employees should earn a salary that is either equal to or more than the current minimum wage, but on many occasions, workers still do not make enough to equal a minimum wage salary.

Along with recognizing who is actually affected by a minimum wage salary, it is also crucial to understand the economic stability the federal minimum wage accommodates for. In 2012 during his State of the Union address, President Barack Obama announced, “A minimum wage worker who works full time year round does not make enough to be considered above the federal poverty line” (Cooper). According to Dr. Sherry Kasper, an economics professor at Maryville College, the federal poverty line for one single individual is around $11,500 a year (Kasper). Since President Obama stated that full time minimum wage workers do not make enough money to meet the requirements to be above the federal poverty line, there are tons of people who make less than $11,500 annually and struggle financially to support themselves, let alone enough to support a family.

Therefore, because the minimum wage so low, America has millions of people living in poverty. In addition to making an incredibly low annual salary, minimum wage workers also have to deal with actual monetary value this type of wage provides for. In the past, earning a minimum wage was sufficient enough to keep a single parent family of around two or three out of poverty. Yet in recent years that has been proven untrue for today’s world. The minimum wage was initiated in order to ensure that families were provided a living wage so that they could afford basic necessities (Kasper). However, in this day and age, the current minimum wage does not provide an efficient living wage, but instead only a wage that each United States citizen is entitled to earn. The graph below titled Annual minimum wage earnings and poverty level for families of two or three (2012$) illustrates the history of the federal minimum wage in terms of buying power in the economy.

The graph above displays the current minimum wage does not provide enough money for a family of three to reach even the most basic level of adequate living standard, but if the president’s proposal to raise the minimum wage to $9.00 an hour went into effect, families would in deed earn enough money to escape poverty stricken living conditions.

As with any important policy issue, people’s opinions will clash and create a huge debate over which side gives the best solution, and the argument around whether or not to increase the minimum wage is no different. There have been many skeptics arise that feel that raising the minimum wage to $9.00 an hour would completely destroy today’s economy instead of helping it. Some even claim that a higher minimum wage would only make life for those living in poverty worse. James Sherk, a Senior Policy Analyst in Labor Economics reported a higher minimum wage would result in more unemployment and it would cause the cost of living to increase (Sherk). The argument involving more unemployment is based on the assumption that employers will be forced to reduce staff sizes in order to compensate for paying a higher wage. Yet contrary to that belief, Princeton economists, David Card and Alan Krueger’s, fifteen year research project, found that modest increases in the minimum wage have had very little or no effect on the rate of employment (NELP). Hence, the rate of employment should be considered insignificant when determining if the minimum wage should be increased or not.

Another negative claim to raising the minimum wage is that the cost of living will rise along with the minimum wage, and therefore not reduce poverty. Based on the way that American welfare programs work presently, an increase in the minimum wage could potentially result in people being cut off from government assistance. Currently, the amount of assistance people receive directly depends on their income levels. For example, each additional dollar of income reduces the Supplemental Nutrition Assistance Program (SNAP) by 24 cents (Sherk). This means that at the exact same rate people earn a little extra money, their level of assistance decreases. But according to the article The Negative Effects of Minimum Wage Laws, research proves that the minimum wage has absolutely no direct effect on poverty (Wilson). Thus meaning that, increasing the current minimum wage to $9.00 an hour will not result in higher levels of poverty.

In today’s society, a $7.25 minimum wage does not sufficiently provide enough money for an individual to afford an adequate standard of living. In fact it does not even furnish basic needs that everyone deserves in life. A higher minimum wage would improve the lives of people living in poverty and possibly boost the entire United Stats’ economy by increasing revenue since people would be able to afford spending extra money. Therefore implementing a higher minimum wage of $9.00 an hour is a great solution for the economic recession that is currently taking place. It would provide sufficient funds necessary for a descent life, improve the economy, and even promote equality among American citizens. In short, the United States government needs to raise the federal minimum wage to $9.00 an hour because it is the most effective solution to the present economic crisis and it is in the best interest of all United States’ residents.

Works Cited

Cooper, David. “Putting a $9 minimum wage in context .” Economic Policy Institute. Working Economics, 15 Feb. 2013. Web. 29 Sept. 2013.

Luhby, Tami. “The impact of a $9 minimum wage.” CNN Money. N.p., 12 Feb. 2013. google.com. Web. 17 Sept. 2013.

Kasper, Sherry. “Public Policy Interview.” Message to the author. 16 Nov. 2013. E-mail.

Kelly, Nathan J., and Christopher Witko. “Federalism And American Inequality.” Journal Of Politics 74.2 (2012): 414-426. Academic Search Premier. Web. 29 Sept. 2013.

“Minimum Wage Overview: Provisions of the Fair Labor Standards Act. (Cover Story). “Congressional Digest 92.5 (2013): 3-10. Academic Search Premier. Web. 29 Sept. 2013.

“Minimum Wage Workers: Characteristics Of Those Employed At Or Below The Minimum Wage. (Cover Story).” Congressional Digest 92.5 (2013): 11-32. Academic Search Premier. Web. 29 Sept. 2013.

“NELP Briefing Paper.” National Employment Law Project. NELP, Jan. 2011. Web. 29 Sept. 2013.

O’Gorman, Mark. “Domestic Policy.” Maryville, TN. 22 Oct. 2013. Lecture.

Sherk, James. “What is Minimum Wage: Its History and Effects on the Economy.” The Heritage Foundation. N.p., 25 June 2013. Web. 29 Sept. 2013.

Wilson, Mark. “The Negative Effects of Minimum Wage Laws.” Cato Institute. N.p., Sept. 2012. Web. 29 Sept. 2013.

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