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Minimum Wage


Regardless of what our political ideologies are, the issue of minimum wage in United States has been very controversial. The problem of income inequality becomes bigger as the economy grows. As David Cooper, an economic analyst at the Economic Policy Institute, argues in the article, this divergence between the rich and the poor can be found in economic data. As productivity increased, corporate profitability and the income for the highest earners increased as well. However, the wages for the middle and the lower classes did not change that much. Mr. Cooper says that incomes have actually fallen due to minimum wage.

Today’s minimum wage is $7.25. The question I want to ask everyone is: Is it enough? Full time minimum wage workers today earn about $15,000 a year, or about 1250 dollars per month. I am not sure if this would be enough for a family to make a living. Some might argue that there are other policies such as food stamps or tax credit, but can we continue these programs instead of making some changes with minimum wage?

There is a debate going on in the Congress about raising the minimum wage to about $10.10 per hour. If it happens, then about 30 million workers will get a raise with 9 million of them whom are parents.

At the same time, it is possible that raising the minimum wage can kill jobs and lower labor demand. However, as Mr. Cooper argues, there is ample evidence that increase in minimum wage has little to no effect on employment. It is also possible that with higher wage, workers have more incentives to work harder and lead to higher productivity. Raising minimum wage can be one of the steps to reduce the gap between the rich and the poor.

Source: US News


  1. The current minimum wage is well below its historic level, because it is not indexed to inflation and has not been increased in many years. Of course various indicators – poverty, small business performance, overall economic growth – were superior in the era when the minimum was much higher, suggesting that raising it won’t invite economic Armageddon. Indeed, a famous study by David E. Card and Alan B. Krueger found that small changes in the minimum wage could even increase employment. Of course doubling the level overnight wouldn’t be a marginal change, a series of annual bumps would be the way to go.

    As you suggest, a full-time minimum wage job makes it very hard to make ends meet, even with food stamps added to the mix, and that’s just for a single individual. After all, you still pay taxes – the combined social security and medicare tax rate is higher than the 14% that Mitch Romney complained about paying. Try working out a budget: subtract rent, food, and note that until ACA kicks in getting sick means no income [min wage jobs don’t provide sick days] and higher outlays. Utilities, a phone … life is grim. I know one person locally who worked 2 full-time jobs during the week and a part-time job weekends to try to make ends meet.

    • gjeong gjeong

      I think it is now necessary to raise the minimum wage. Low income families cannot survive. At the same time, many firms and businesses will complain about the high minimum wage. The budget constraints for them can lead to lower employment rate and possibly less benefits for the workers.

  2. peaseley peaseley

    I have read recently about fast food workers protesting about their wage. One of the wages that I have read they are asking for is 15 dollars an hour. If they were to receive that wage I wonder what that would do to the prices in these restaurants and the job market for fast food jobs.

    • gjeong gjeong

      Yeah, this is another concern about raising the minimum wage. Businesses argue that they will hire less workers and prices for consumers are likely to increase as well.

  3. dillard dillard

    Recent economists argue that stagnant minimum wages over the latter half of the 20th century only applied to workers of lower wages. Due to the ever increasing income disparity in the US, people at the top 1 percent of the wealthiest Americans are who see increases in their wages while the rest of the employed do not see the same increases in wage with the productivity increases in the US. This has let to indexed real wages to decline over this period, consequently. This same low minimum wage also decreases upward mobility due to the impact adversity has on these people psychologically and physically, and with meager health care coverage, small health issues arising as a result of strenuous activity can be the difference between starvation and not. Lets hope the minimum wage is increased in this up and coming year so that the lowest skilled members of the labor force can begin to support themselves slightly more and even relieve some burden that welfare, the EITC, and other institutional programs have on tax payers.

  4. The reference to the EITC (Earned Income Tax Credit) and “other institutional programs” (SNAP – Supplemental Nutrition Assistance Program (formerly the Food Stamp Program) raises an important set of policy alternatives: direct income supplements. Politically this is unacceptable, because of the claim that it creates welfare dependency or has other undersirable side effects. (How important these are numerically is another question – I have met individuals who know how to game the system, but I’ve also met doctors who cheat insurers. In addition, if we want a stay-at-home parent and children who have the resources to succeed, well, young parents obviously have only a few years of job experience [as do young non-parents] and accordingly are on average less well paid.) But the more that we guarantee a minimum standard of living, the less we need to try to raise incomes by setting work rules and the more we can simply let labor markets do their thing.

    See however my initial comment – if there are externalities, if wages suffer from a prisoners dilemma that leads to an inefficient equilibrium, then minimum wages are not necessarily inferior to other approaches.

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