The issue of minimum wages

The topic of minimum wages has stirred global debate.

The topic of minimum wages has stirred global debate. It has sparked passionate arguments across the United States, with the major issue being whether or not the country’s minimum wage should be raised. Except for jurisdictions with their own minimum salaries, the current federal minimum wage in the United States is $7.25 per hour, a rate set in 2009. (Neumark and Wascher). Proponents of raising the minimum wage say that doing so will lower the cost of living and thereby reduce poverty levels, among other things. Also, the proponents hold the position that increasing the minimum wage would increase the purchase power of the consumers and enhance access to various commodities and services. However, increasing the minimum wages is very unlikely to result in such outcomes but would instead lead to adverse effects. This paper discusses job loss, adverse effects on low-skilled workers, minimal effects on poverty reduction and increased prices for consumers as the four main reasons why the United States minimum wages should not be increased.

Job Loss

A good economy should offer employment opportunities to the citizens and even economic interventions and plans should enhance job opportunities. However, raising the United States minimum wage would result in job losses rather than maintain the existing jobs or creating more. Evidence indicate that from the first time that a minimum wage imposition was effected, many jobs were lost. In 1938 when for the first time the 25-cent minimum wage was imposed the consequence was a significant ant loss of jobs. Also, more recently, President Barack Obama had to sign into law a bill that sought to postpone the increases in the minimum wages put in place in the American Samoa. Some key studies on the minimum wages in the United States have shown that there is no need to increase the minimum wages. In 2006, one of the reviews on over one hundred minimum wage studies undertaken by William Wascher and David Neumark indicated that more than two-thirds of the studies showed adverse effects on employment. Also, in 2010, Richard Burkhause and Joseph Sabia approximated that about 1.3 million jobs would be lost should the federal minimum wage be raised from the present $7,25 per hour set in the year 2009 to $9.50 per hour (Neumark and Wascher).

Adverse Effects on Low-Skilled Workers

Having economic policies and interventions that would help the low-income earners, especially the low-skilled ones would be good for the U.S. economy. However, raising the U.S. minimum wage would probably hurt the low-skilled workers. Even though raising the minimum wage is supposed to help such people, it would disproportionately hurt them. In the review carried out by Wascher and Neumark, found out that most of the literature indicated solidified the conventional belief that the minimum wages tend to limit employment particularly among the low-skilled workers. Other studies such as the 2012 analysis of the New York state minimum wages showed that a rise from $5.15 to $6.75 per hour would result in employment rate reduction for the youths and the less-educated people at a rate of between 20.2% to 21.8%. A similar analysis carried out by Michael J. Hicks in 2010 indicates that the most recent round of the minimum wage increases is responsible for about 550,000 less part-time jobs and about 310,000 young people who work on a part time basis (Hicks).

Minimal Effect on Poverty Reduction

One of the arguments proponents of increase in minimum wage cite is that by increasing the minimum wage then the rate of poverty would be reduced. However, increasing the minimum wage is very unlikely to result in reduction of poverty levels. In one of the initial federal wage increases, that saw the minimum wage raised from $5.15 to $7.25, out of all the workers who were expected to gain from it, only about 15 percent of them lived in what would be referred to as poor households (Wilson) Today, if the federal minimum wage was to be raised from $7.25 to $9.50, then only about 11 percent of the workers who would benefit come from poor households. From 1995, eight different studies have looked at the income and the poverty effects of the minimum wage increases and seven of the studies have realized that the previous minimum wage increases had no impact on poverty (Wilson). One of the recent academic researches established that both the federal and the state minimum wages increases imposed between the year 2003 and 2007 did not have any effect on the poverty rates.

Increased Prices for Consumers

Increasing the U.S. minimum wages means that more money is needed to pay for the raised wages. Someone has to pay for the costs that come with the increased minimum wages. Increased commodity prices for the consumers means a high cost of living. A review of over 20 minimum wage researches focusing on the price effects noted that a 10 percent rise in the minimum wage in the United States raises the prices of food by up to 4 percent (Wilson). It means that consumers will have to pay more for goods, including basic commodities such as food to pay for the cost of the minimum wage increases. In a 2007 study carried out by the Federal Reserve Bank of Chicago established the restaurant prices rose as a response to the increases in the minimum wages. Therefore, it makes no sense for the minimum wage to be increased then restaurants and other commercial premises to hike their prices by the same rate or even more (Wilson).

Conclusion

The United States minimum wage should not be increased from the present $7.25 per hour. Studies have indicated that increasing the minimum wage would achieve very little of the benefits that the proponents on minimum wage increase site. Increasing the minimum wage would have much more adverse effects than benefits including more job loses, negative effects on the low-skilled labor, insignificant effects on poverty reduction and increased prices for the consumers. Instead of increasing the minimum wage, the government can think of other strategies that would help the United States workers, especially the low-skilled and the low-income earners without hurting the economy.

Works Cited

Hicks, Michael. Who Lost Jobs. n.d February 2010. Web. 15 July 2017.

Neumark, David and William Wascher. Minimum Wages and Employment: A Review of Evidence from the New Minimum Wage Research. n.d November 2006. Web. 15 July 2017.

Wilson, Mark. Policy Analysis: The Negative Effects of Minimum Wage Laws. 21 June 2012. Web. 15 July 2017.