MinimumWage legislation in the United States
Minimumwage legislation in the United States stands out as one of the mostcontentious and debated issue by many people. Minimum wage isconsidered as the standard for the lowest wage that a societyaccepts. Most countries, globally, have minimum wages laws hence,minimum wage debate plays a key role to policy makers (Neumark &Wascher, 2008). Social activists have contributed immensely to thisdebate since most individuals who have a high tendency of earning aminimum wage come from minority and low income families. Again, thisdebate has attracted huge attention from the average Americans sincethey have paid minimum wage at some point in their lives. Manyconsider minimum wage a price floor it prevents labor demanded andsupplied from moving towards equilibrium quantity and price (Neumarket al., 2008).
Somepeople argue that minimum wage is an inefficient tool for minimizingthe level of poverty in the society. This is attributed to the factthat minimum wage is not as well targeted as the Earned Income TaxCredit hence, extreme changes may pose detrimental effects of newlower-skill workers’ employment opportunities (Filer, Hamermesh &Rees, 2006). Undeniably, however, minimum wage establishes asignificant link between such workers and higher-wage jobs in thecurrent economy. Giuliano (2013) also argue that minimum wage plays asignificant role in rewarding work and attachment to labor force in adirect and enormous manner. Likewise, Brown, Gilroy, and Kohen (2012)argue that U.S workers’ wages have eroded over the past decades.This, is in turn, has resulted into increased growth of incomeinequality hence, leaving the economy less vibrant as compared to asituation where income is distributed evenly. Therefore, Filer et al(2006) insists that raise of minimum wage as well as theincorporation of a system for automatic adjustment will be a keyfactor in reversing the erosion of earnings of low-wage workers aswell as reduce the level of inequality on the amount of income thatworker earns.
Minimumwage positions create a platform for workers to acquire severalskills that enable them to be more effective in their duties. Workerscommand higher pay as they become more productive in fact, Card andKrueger (2004) findings show that two-third of American minimum wageworkers earns a payment raise annually. Consequently, entry levelpositions become less available hence, career ladders of manyworkers are sawn off the bottom rung. In fact, U.S welfare programshave a lot of uncordination and overlapping thus, preventingindividuals in need from benefitting from higher wages. This isbecause when minimum wage is increased for the needy individuals,they lose federal assistance and tax credits. Therefore, most of thewage increase is offset by the benefit losses that they incur.Indeed, minimum wage has little or no contribution towards the fighton poverty.
Likelyeffects of increasing minimum wage
Increasein minimum wage has a high likelihood of reducing employmentopportunities for most new labor force entrants and lower skillworkers. According to Card et al (2004), attempts to increase minimumwage only raise the income of workers at lower end in an ineffectivemanner since it is targeted in a poor manner. For instance, majorityof the targeted workers. A modest minimum wage increase would not putmajority of individuals living in poverty above the poverty line.Brown et al (2012) findings indicate that added benefit costs andpayroll may become too much for many employers to be bear especiallythe small businesspersons. It reduces the employment opportunitiesfor disadvantaged workers in a greater way than it cut down theoverall unemployment. This is because higher minimum wages attractmore workers to particular jobs. As a result, more workers with othersources of income are drawn into the labor market. When minimum wageraises many college students and suburban teenagers enter the labormarket. As a result, disadvantaged adults and urban teenagers whowould have taken the job at previous wages are left out. Indeed,workers, who the minimum wage aims at helping, are the one who facethe most challenges in finding and acquiring jobs (Giuliano, 2013).
Wagesspillovers may also occur due to an increase in minimum wage. Forinstance, if a firm or organization increases the amount of minimumwage it pays it workers, then it would have to implement a higherwage amongst its workers in order to ensure equitability on theirpay. This, in turn, will create huge dissatisfaction amongst longtime workers if new workers make more money than they made when theywere hired.
Itwould also affect the federal budget in a direct manner federalgovernment is forced to increase the wages that it pays employees whowork on hourly basis. Likewise federal spending and taxes will alsobe affected in an indirect manner. This is because increase inminimum wage would reduce in real income for some people whileincreasing in real income for others. In other words, increase inminimum wage would render some people jobless hence, reducing theirreal income. As a result, such people would pay fewer taxes while atthe same time receiving more of the federal benefits (Neumark et al.,2008).
Undeniably,in the last few decades America has had astounding positive economictimes. It has continually since an increase in number of citizensthat come up with new ways to acquire and amass wealth. Despite this,there are some Americans who have not yet participated in this newlyamassed wealth. Therefore, establishment and legalization of minimumwage has become necessary in order to help such Americans, who livein poor conditions, in order to decrease the level of poverty as wellas promote a healthy economy. The legalization of minimum wage hasgiven rise to several debates with some opposing it while othersupporting it in an enormous manner. Supporters of minimum wage arguethat it plays a key role in enhancing fully participation in labormarket. They also argue that minimum wage pave way for the increasein the amount of income of the lowest wage earners in the entirenation. However, the opponents of the minimum wage argue that it onlyserve to create more unemployment in the country since it does nottarget the group of individuals that it advocates to help. Forinstance, it does not offer aged adults instead it offer employmentto individuals that already have other sources of income. Despite thehighly contested debate on minimum wage the United States shouldadopt and embrace minimum wage legislation in the new century sinceit brings more benefits than harm to its citizens.
Brown,C Gilroy C, and Kohen A. (2012). The Effect of the Minimum Wage onEmployment and Unemployment.  Journalof Economic Literature,20 (2), 487–528.
Card,D & Krueger, A. (2004). Minimum Wages and Employment: A CaseStudy of Fast-Food Industry in New Jersey and Pennsylvania. AmericanEconomic Review,48(4), 1-20.
Filer,R.K Hamermesh, D.S and Rees, A.E. (2006). TheEconomics of Work and Pay.New York: HarperCollins.
Giuliano,L. (2013). Minimum Wage Effects on Employment, Substitution, and theTeenage Labor Supply: Evidence from Personnel Data.TheJournal of Labor Economics,31, (1), 155-194.
Neumark,D & Wascher, W. (2008). MinimumWages.Cambridge, MA: The MIT Press.