SOC ∙ Ms. Wiley ∙ Minimum Wage Discussion, D___
Name:
Created in 1938, the minimum wage is the lowest hourly wage that employers may
legally pay to workers. The federal minimum wage is $7.25 per hour effective July
24, 2009 (from $6.55 previously).
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Note (1): A state may impose a higher minimum wage than federal
minimum wage. (In PA, minimum wage is the same as the federal
minimum wage. As of January 2015, there were 29 states with a
minimum wage higher than the federal minimum.)
Note (2): An employer may pay a tipped employee no less than $2.13
an hour in direct wages if that amount plus the tips received equal at
least the federal minimum wage. If an employee's tips combined with
the employer's direct wages of at least $2.13 an hour do not equal the
federal minimum hourly wage, the employer must make up the
difference.
The minimum wage does not increase automatically. Congress must pass a bill which the president signs into law in order for the
minimum wage to go up. Thus, the minimum wage does not automatically keep up with inflation. If the minimum wage at its height
in 1968 had been indexed for inflation, it would be over $9.10 today (calculated in year-end 2006 dollars). [Note: Congress has made
sure that their salary has kept up with inflation over the years, but not those that work day-in and day-out on minimum wage. Is that
fair?]
Supporters of the minimum wage say that it increases the standard of living of workers, reduces poverty, helps to create stable
families, increases worker productivity, and forces businesses to be more efficient. Opponents say that if it is high enough to be truly
effective, it increases unemployment, particularly among workers with very low skill due to inexperience or handicap, thereby
harming lesser skilled workers to the benefit of better skilled workers.
Though classical economists were traditionally opposed to the minimum wage because of the assumption that it would lead to more
unemployment, by 2000, most economists agreed that modest increases in the minimum wage prompt little change in
unemployment. Instead, businesses become more efficient and may reduce wages or other benefits of higher earners that were
earning too much for the labor/skills they provided. Yet still, many economists are reluctant to support minimum wage hikes since
the minimum wage will never solve the problem of growing inequality or poverty. Better solutions could be found.
Supporters:
If you worked the standard 2,000 hours in a year at the minimum wage, your salary for the year would be approximately $12,335
(after taxes). Let’s say you must pay $500/month rent for your apartment. How much money would you have left over to spend each
day? The answer is $17.60. This is why so many people working minimum wage must work two or three jobs, because eight hours is
simply not enough. Try living on less that $18 a day – consider what expenses beyond rent may also be required – childcare, food,
transportation, clothing, utilities, toiletries, schooling…
A full time minimum wage worker earns only $13,000, assuming he or she works 40 hours a week, 52 weeks a year. That is $4,170
below, or just 75.7% of, that poverty line. Everyone should have the opportunity to earn a decent wage. No American should be
compelled to work at a rate that, assuming full-time labor, every weekday, all year long, amounts to the $13,000 that the current
minimum wage provides. The minimum wage is not just about helping the impoverished or uneducated. It is about fairness, the
value of work, and the opportunities that work provides. Everyone should be able to achieve the American Dream.
The minimum wage has been an important part of the U.S. economy since 1938. It is a statement of how the nation values work; it is
a tangible measure of how Americans view employers’ obligation to their workers; it is an equalizer in a low-wage labor market
where workers have little bargaining power since they need to work to survive; and it is an effective policy that helps low-and
middle-income families stay together and contribute to the economy and society in positive ways.
Opponents:
Although minimum wage laws can set wages, they cannot guarantee jobs. In practice, they often price low-skilled workers out of the
labor market. Employers typically are not willing to pay a worker more than the value of the additional product that he produces.
This means that an unskilled youth who produces $4.00 worth of goods in an hour will have a very difficult time finding a job if he
must, by law, be paid $5.15 an hour.
In addition to making jobs hard to find, minimum wage laws may also harm workers by changing how they are compensated. Fringe
benefits—such as paid vacation, inexpensive insurance, child care, and on-the-job training—are an important part of the total
compensation package for many low-wage workers. When minimum wages rise, employers can control total compensation costs by
cutting benefits. In some cases, employers convert low-wage full-time jobs with benefits to high-wage part-time jobs with no
benefits and fewer hours. Studies have shown that a 10% increase in minimum wages decreased on-the-job training approximately
2%. Since on-the-job training is the way most people build their skills, these findings suggest that minimum wage laws also reduce
opportunities for the unskilled. Businesses may also respond to higher minimum wages by decreasing overall employment,
substituting machines for people, moving production abroad, or shutting down labor-intensive businesses.
Legislating a minimum wage is commonly seen as an effective way of giving raises to low-wage workers. Unfortunately, it creates a
surplus of workers (suppliers of labor), more of whom are willing to work in minimum-wage jobs than there are employers
(demanders) willing to hire at that wage. We call a surplus caused by the minimum wage “unemployment.”
1.
Explain two arguments that can be made in support of the minimum wage/increasing the minimum wage. Do you find these
arguments compelling? Why or why not?
2.
Explain two arguments that can be made in opposition to the minimum wage/increasing the minimum wage. Do you find these
arguments compelling? Why or why not?
3.
Are you satisfied with where the minimum wage is at? Should it be increased or decreased? Abolished? If those making
minimum wage are unable to live above the poverty line (which is the case today) does this necessarily mean the minimum
wage should be increased? Why or why not?
4.
If minimum wage isn’t the answer to growing inequality and poverty (as many economists contend), then what is the answer??