Minnimum Wage

A big debate that has been going on for a while has been whether or not Congress needs to pass a bill that would again raise the minimum wage. Now that the Democrats have taken control of the House, they have decided to over rule the Republicans. The bill to raise the minimum wage, which the White House was opposed to, was passed through the House of Representatives on January 10. The Democrats found that the best decision would be to increase the minimum wage another $2.10 to $7.25 over the next 26 months. After doing some extensive research on this topic raising the minimum wage would have many negative effects on the economy as a whole. About 6.6 million people (5% of workforce) who earn less than $7.25 would be directly affected by the increase (Facts at a Glance 2007), but studies show that the increase, which is geared toward helping the unskilled workers, could actually cost many of them their jobs. Unemployment throughout the major cities will undoubtedly see an increase from the employers not being able to pay all their unskilled workers the increased wage (NCPA 2001). An increase in minimum wage will cause more problems for youths, minorities, unskilled workers, and even the middle class. This paper will also show how past increases of the minimum wage has affected unemployment, prices of products, and the economy.

Although an increase in the minimum wage indisputably has its downfalls, an argument that has to be conceded is that some people in the U.S. would be able to benefit. The increase in the minimum wage would raise the standard of living for many families already living under the poverty line. According to (Facts at a Glance 2007), the increase in the minimum wage would benefit approximately 15 million hourly paid workers. The increase would allow 7.3 million children to see their parent's income rise. This in turn would make for an enhanced living environment for not only the children but the entire family that suffers trying to survive on the wages they make now. Although the increase in minimum wage would benefit many struggling families, only 520,000 people out of an estimated 73.9 million hourly paid workers actually earn the set minimum wage (Sense and Non Sense 2007). Besides the fact, only 16% of people in the U.S. that earn minimum wage are the sole supporters of their family. Most of the people that earn a minimum wage are 60% women and 69% part-time employees. (Rosenberg, Joyce 2007). Supporters of the minimum wage make it seem like the poor will benefit entirely from the increase when the fact is, according to Minimum Wage Maximum Folly 2006, only 18% of the benefits from the increase will go to families living below the poverty line, while more than half will benefit the middle class where the person in the family who makes the second source of income in the family will be the ones benefiting from an increase. Besides, 40% of minimum wage workers live in households making $60,000 or higher. Teens that are lucky enough to keep their jobs will be the ones benefiting the most, considering most of the countries youth's work at or around minimum wage. The point here is yes, an increase would help a few underprivileged families, but most of the people that will prosper from the increase are people whose income is not even the household's main source for paying the bills, or teens whose parents are already well off making much more than the minimum wage.

Seeing the ways in which the minimum wage could benefit struggling families, let's now look at the many different ways where the minimum wage could end up doing more to hurt the economy rather than help it. The main consequence of an increase in the minimum wage would be the increase in unemployment (Facts at a Glance 2007). With the rise in the minimum wage, employers that have many minimum wage employees would not be able to pay the raise and have to lay off many of their minimum wage employees. Generally, minimum wage employees tend to be unskilled workers, and if unskilled workers lose their jobs, it will be a longer and harder process for them to find work again since due to the increase, 4% fewer jobs will be available. A study done by Minimum Wage Trends 2006, found that when state wages increase, people remain on welfare 44% longer than states that don't increase minimum wage. This ends up costing the government more money having to pay for government programs and laid off workers on welfare. Teens will take a big hit if the minimum wage increases also. Youths normally do not have as many skills as older, more experienced workers, in turn making it so employers will not want to pay them the increase. Minimum Wage Maximum Folly 2006, studies show that 128,000 teens lost their jobs after a $.50 increase in 1996. Another big consequence to increases the minimum wage is that with the wage increase, besides jobs being lost, new jobs will rarely be created. The amount of labor expected to be done will increase, and employers will tend to be less lenient (Sense and Nonsense 2007). A study that was done by Minimum Wage Trends 2006 shows that a 10% increase in wages reduces demand of hours worked by 1 or 2 percent depending on circumstances. Along with a decrease in hours, many