What to lay off their employees and escalate

What comes to mind when the words minimum wage are said Perhaps one thinks of low-paying jobs, poverty, and struggles. According to the Cambridge Dictionary, minimum wage is the lowest wage permitted by law or by a special agreement (such as one with a labor union). Minimum wage laws set the standard hourly rate that workers can be paid by their employers. Usually this means that an employee cannot negotiate with their employer to work for above 7.25 an hour since this is the set pay wage, which at this time unfortunately cannot be changed. Minimum wage not only affects individuals lives, but it affects the nation as a whole because many workers cannot support themselves and their families. However, increasing minimum wage for small businesses will do more harm than good when it comes to addressing unemployment and providing workers with a comfortable quality of life. Minimum wage has become an increasingly popular issue in the nation. Many people want to increase minimum wages in order to support workers rights, but there are two main reasons why economists do not agree. The argument is that increasing minimum wage would force the businesses to lay off their employees and escalate the unemployment levels. According to the Congressional Budget Office, it has been observed that there has been a minimum wage increase starting from 7.25 to 10.10 per hour. By this it would result in a dramatic loss of 500,000 jobs which would put people and their families at a poverty level (Congressional 50). A survey had been taken place around that same time where more than 1200 businesses and professionals stated that 38 of employers that currently pay their employees minimum wage said that they would lay off numerous employees if the minimum wage was raised to 10.10 which would impact the hiring levels dramatically (Congressional 56). This would make it extremely hard for individuals who are trying to get hired for a job. One major effect is that the raising of minimum wage tends to affect and target those who are earning more than the standard amount. Minimum wage is making many employers reduce their amenities such as benefits and training, but they and their shareholders are getting the money. Raising the minimum wage would have a way different meaning of accumulating more money in an employees pockets which would overall make the situation more complicated. The reason why this is happening is because employers feel that since workers are making more than the average, they should not be entitled to any benefits because their pay is covering everything. Employers will cut jobs in response to a salary increase. The second underlying reason that many economists cite is that there are better and more efficient ways to help the working class than jeopardizing their jobs, namely the earned income tax credit. For example, if a person is poor, the earned income tax credit will kick in to supplement his or her minimum wage earning, providing them with more cash. According to economist Stacy Rodriguez, a person who is earning at least 7 an hour might get another extra 3 from the government through the earned income tax credit (23). The earned income tax credit has several advantages to it over the minimum wage. Firstly, earned income tax credit only targets the poor, whereas an increased minimum wage targets all those whom employers want to possess, including those who are educated, as well as teenagers whose parents are well off (Garcia 3). For the same social cost, the earned income tax credit will give the poor a higher advantage than increasing the minimum wage for everyone. On the other hand, according to the Kreuger study, minimum wage disproportionately affects students. They are still young, in school, and most of the time they are trying to make money to support themselves through school and to pay for whatever debt they may have such as for school books, etc. Teenagers and young adults may be disqualified from the workforce if the minimum wage is increased. The federal minimum wage has a devastating impact on teenagers because many firms and employers are not willing to pay young workers with little to no educational skills or experience the average pay, even anything higher. Teenagers who are trying to find a job right now are having a hard time because ever since 2009 the teenage employment index decreased after the minimum wage increased in July of 2009. Raising the minimum wage would decrease high school enrollment and would increase the high school drop out rates. The higher wages from the federal minimum wage legislation tends to reduce high school completion students across the nation with limited skills. These students are more at an disadvantage because they fall under the category of individuals with lower wages and career opportunities in the long run if they never get a chance to finish high school. According to the Journal of Economics and Sociology, a 25 cent increase in the real minimum wage was associated with a 55 increase in the drop out rate specifically for Hispanic students. Increase in earnings of very low skilled workers would decrease high school enrollment rates by at least 5 to 7. Within the states, teens are able to leave school at the age of 18 without progressing onto furthering their education (Economics 23). Some drop out to help their family make ends meet by getting a job and others have an opportunity to continue on their education. Most of the times these students come from a middle class or poverty home where they are forced to get a job to not only support themselves but to also support their family and pitch in for any debt and responsibility that may arise. On the other hand, an increase in minimum wage would dramatically hurt businesses and force companies to shut their doors. Minimum wage will also have an effect on smaller businesses aside from restaurants. If the minimum wage were to increase, it would definitely harm businesses, especially those independently owned stores and boutiques. According to the National Federal Foundation, at least 37 percent of small retailers would observe massive threats when it comes to continuing to operate and pay employees over a minimum wage of 15 an hour (National 12). Also fast-food chain companies would be forced to close their doors and lay off thousands of employees if the federal minimum wage were to be raised to 15. In addition, big department stores such as Walmart experienced a dramatic increase in the minimum wage which led to numerous closures across the nation and created the end result of many cancellations of upcoming stores that are supposed to be opening soon. These department store owners are making over 13 billion in one day and yet they claim they cannot afford to pay their employees decently. Instead, they are just keeping all the money to themselves (Economics 30). If employers were to pay their employees a decent amount of money, the department store owners share would only reduce a little bit which is way more than enough to carry on a suitable life. Raising minimum wage would definitely raise the prices on consumer goods. According to the Federal Reserve Bank of Chicago, either raising the wage of fast food employees from 15 to 22 per hour would definitely result in a price increase or it can lead to a reduction in product size (Federal 26). For example, a hamburger will be much smaller in size and the quality of the products will be reduced. Not only fast food joints are in this situation at present, but it is also the same for coffee houses. The price of a cup of coffee has been increasing over the years, especially in Chicago coffee shops such as Dunkin Donuts and Starbucks. These are two of the most popular coffee houses and are highly in demand. If you add the retail prices between the three sizes of coffee the total would add up to 10, but the amount of product that is given is decreasing. Going back to 1996-1997, there was a major increase in the federal minimum wage which produced a greater employment loss with a much larger proportions of low wage employees. A Kreuger study had taken place during that time comparing employment at majoring fast food joints. They were comparing one fast food joint that increased minimum wage to the other who had decreased the pay for its employees. If minimum wage was set at a steady level it will not necessarily reduce employment, it will just be harder for employees to make enough money to carry on a suitable lifestyle and provide for their family in time of need. A conclusion has been made that minimum wage does reduce the employment rate over time. In order to be qualified for any job in todays era one needs to at least obtain a high school diploma. From an employers perspective, people with the lowest skill levels have a hard time making and justifying higher wages. As a result, it will be harder on these individuals to help provide for their family and make ends meet. John Dorn, Senior Fellow at the Cato Institute states that a 10 increase in the minimum wage leads to a 10 to 3 percent decrease in employment of low skilled workers (Dorn 32). People who are qualified make more than those who are below average in their educational skills. The reason why this is happening is because it is used to expose the workers whose skills do not exceed a level that is corresponding to 7.25 per hour to the competition of the better educated and more skilled individuals who are able to earn more than 7.25 an hour. Also, raising the minimum wage would definitely increase the housing cost. It will make buying and renting a home more expensive. There are many cities across the nation which have a limited housing supply and raising the minimum wage, but not increasing the housing stock would lead to an increase in rental prices. It can go up to at least 700,000, in which the minimum wage workers will have more money to compete for the same low inventory of rental units (Garcia 16). For example, rent is way more expensive in bigger and busier cities in which wages are apart of a smaller fraction of a businesss overall costs. By increasing the minimum wage it will have a smaller effect on the business than on the areas in which the rent is cheaper. Raising the minimum wage causes a temporary spike in the lending power where landlords have the power to raise the rent on their tenants if they are willing to and are able to pay more than they used to. If tenants can not keep up with the monthly rent it will end up in losing their home. In conclusion, it can be proven that increasing minimum wage does more than good not only for the nation but for individuals lives as well. In a whole, minimum wage helps to reduce unemployment, but not in a great amount. Minimum wage does not increase the number of employees who are willing to work, instead balances on a whole of workers who are not better off. Narain PAGE MERGEFORMAT 5


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