Microeconomics Research Paper
Nicholas Benyola Professor Mansourian Econ 201- 25 17 May 2012 Microeconomics Research Paper Minimum Wage In the United States, minimum wage has remained at a low number for several years. Minimum wage is defined as the lowest possible income that an employer can legally pay an employee. This ensures that all people are fairly paid and not defrauded by companies or businesses. Minimum wage is considered a price floor and the minimum wage laws determine the lowest price possible that any employer must pay for labor.
In an economic model, the quantity of supplied is greater than the quantity demanded and the minimum wage is above equilibrium price and quantity. Minimum wage prevents labor supplied and labor demanded from moving toward equilibrium price and quantity. Although the government is trying to maintain a good balance of income distribution, there are is a high amount of people that work year round and still fall under the national poverty level. The government tries to stop the rich from getting richer, and the poor from getting poorer, so they make sure that everyone is earning the same amount of money.
Even if our balanced income distribution is at a good number, an increase of the minimum wage price would help our country in a lot of ways. Raising the current minimum wage is one way to reduce poverty, will help businesses grow, and could help a lot of communities as well. The first advantage of increasing the minimum wage is that it will help poor people to earn a higher income. For many workers, minimum wage is simply not enough money for them to be able to support their families. A higher minimum wage would guarantee a higher quality of life for the people who work in basic jobs such as cleaning and preparing fast food.
These workers’ economic situations are usually a result of their lack of education and training, and it is often difficult for them to get more education or training because of their economic situation. For many working Americans, an increase in the minimum wage will make the difference between living in poverty and not. An increase has the potential to help the standard of living for the poorest of people. This is a true statement, but opposition says that this only drives up the standard of living and inflation rate in the world. Inflation is defined as the overall general upward price movement of goods and services in an economy.
Although some people who earn the minimum wage are teenagers, almost two-thirds are adults. The average minimum wage worker brings home about half of his family’s earnings. Increasing the minimum wage will help these workers to make up for lost ground due to inflation and it will help make work pay. Though inflation is one of the main problems in our economy and even though inflation and minimum wage are directly related, increasing minimum wage will give opportunity for a lot of lower class families to make enough to afford important things, such as insurance.
If someone takes a trip to the doctor, with no insurance, they will most likely have to pay around eight- hundred dollars out of pocket. This would take anyone at least three months on minimum wage with two incomes to pay off these medical bills. Barak Obama’s plan to institute a health care plan for everyone will relieve a huge burden on people and also allow them to stay above the poverty line. Heidi Shierholz, an economist at the Economic Policy Institute says, “Jacking the federal minimum wage from $7. 25 to $8. 25 would give a raise to 10 million workers, including many currently earning their state minimum wage” (Shierholz).
This research supports that a minimum wage increase would help millions of people who work not only at the minimum wage but below it and just above it as well. While an increase of a few thousand dollars per year would rarely lift a person or a family out of poverty, it could ease the struggle to pay for groceries, child care or rent, and it adds meaning and dignity to labor. A higher minimum wage is not enough, but it is very essential for the working poor. Minimum wage was created to keep businesses from taking advantage of their employees.
Most of the workforce making minimum wage is young adults because companies feel that they can take advantage of them. Of the total affected workers, women suffer the most which is evidence that companies still have gender discrimination in the workplace. Companies are not only paying people small amounts of money but are also treating the women of America unfairly. If discrimination ended in the workplace then businesses would grow because they would have a more diverse workplace. Employees who are earned a higher wage would take their job more seriously.
They would call in sick less often and would be more productive on the days they are at work. An employee working for a lower wage may spend a great deal of time job hunting, looking for a position that pays more but if employees are already earning a higher wage, they would not have to be searching for a higher paying job. This would reduce employee turnover for companies. John Montgomery, economic analyst for ABC states that, “From the business perspective, wages come in as one of the most expensive running costs, and have to be paid whether you are taking money that day or not.
However, if there were no minimum wage, there is no doubt that many unscrupulous businesses would exploit staff wherever they could” (Montgomery). Of these adult workers, over half work full time and another third work between twenty and thirty hours per week. This statistic shows that a big majority of adults on minimum wage are working at least twenty hours a week. So, if minimum wage increases, it could be a huge benefit because it could add a ten increase to a final salary and this would affect millions of people in our workforce in a positive way.
For most small companies there is a major upside to a minimum wage increase because it can stimulate the economy. Usually when people make more money, sometimes they make lifestyle changes and they buy more which generates more revenue in the economy. Raising the minimum wage would be beneficial not only to business but to communities as well. Many poor families rely upon economic aid from social services to survive and these organizations not only cost the community tax payer but they also take away from services provided by local businesses.
With an increased minimum wage, low wage workers would be less reliant on social services and more willing to spend their money in the local economy. Over time people would be making more money and then would be able to afford more things in their community. The lower class is dependent upon dollar stores because their low income does not support flexible spending. This creates unequal revenue to producers, so an increase of minimum wage would help communities as a whole because more business would have the chance to grow.
Kai Filion, Policy Analyst at the Economic Policy Institute, notes that “A recent study by economists at the Federal Reserve Bank of Chicago examined 23 years of household spending data and found that an increase in the minimum wage lead households with a minimum wage to significantly increase their spending. ” This research supports that even a slight increase of minimum wage would increase spending throughout communities which would be beneficial for the entire country because it would increase the local tax base.
Many government programs that try to help people with low income place a tax burden directly on others. Raising taxes is not a necessary step in establishing a higher minimum wage because government should not be taxing companies, but asking them to pay more to their employees. An increase in payment to employees would increase business expenses which would help companies pay less in taxes. Therefore, an increased minimum wage has potential to aid in the growth of communities around the world.
For Americans, we must support an increase of minimum wage to further promote a healthy economy and a decrease in poverty. Minimum wage is one program that promotes active participation in the labor market and if the amount of citizens on welfare is going to decline, they should be offered more jobs that can pay a livable wage. If minimum wage workers were paid a living wage, they would spend it in the local economy which would turn in to a powerful economic stimulus and the government would save money on a lot of expenses.
Raising the current minimum wage is one way to reduce poverty, will help businesses grow, and could help many suffering communities throughout the nation. This step toward economic equality may be essential for workers of all classes to have opportunity for a better standard of living. Works Cited * “Minimum Wage Increase Would Help Sluggish Economy, Say Experts. ” The Huffington Post. TheHuffingtonPost. com, 07 June 2011. Web. 16 May 2012. <http://www. huffingtonpost. com/2011/06/07/minimum-wage-increase-help-economy-experts_n_872617. html>. * “Http://www. abc. net. au/news/2012-05-16/unions-push-to-increase-state-min