minimum wage

Should We Raise the Minimum Wage to the Average Pay Rate?
April Alston
Melisa Fennern
Sharon Grady
Nicole Huffman
Terika White
University of Phoenix
BCOM/275
September 30, 2013
Michelle Maldonado

“Should We Raise Minimum Wage to the Federal Average Pay Rate?”
On the United States Department of Labor website it states that in 1938 it was decided that a federal minimum wage should be set. When it was set, it was set for the amount of $0.25 an hour. Now as of 2013 it is $7.25 an hour. (Grossman 1978. Washington’s minimum wage is the highest at $9.19 an hour, it joins its 18 other states with a higher wage. Almost half the states agree with the minimum wage; five have wage lower and another five do not even have a minimum wage. There is clearly a divide on the thoughts of raising minimum wage to make things more even. What our group wants to question here today is the raise of minimum wage to the federal average pay rate. In the United States after researching 426,448,460 people in more than a thousand occupations the average pay rate would be $20.60. (United States Department of Labor 2013) Thomas Sowell says it best,
`“Unfortunately, the real minimum wage is always zero, regardless of the laws, and that is the wage that many workers receive in the wake of the creation or escalation of a government-mandated minimum wage, because they lose their jobs or fail to find jobs when they enter the labor force. Making it illegal to pay less than a given amount does not make a worker’s productivity worth that amount—and, if it is not, that worker is unlikely to be employed.”(Sowell 2010)
First and foremost, that it is right to ensure that each worker earns enough to live on. President Obama said, “no one who works full-time should have to live in poverty”. When a person is working a 40 hour week ($15,080) and not making more than the poverty threshold ($15,510 two person household) this is a problem. So raising the minimum wage will start by allowing working class people to rely less on government assistance. If a family isn’t making ends meet on their take-home pay alone, they have to rely on the community to fill in the gaps in the form of food stamps and state subsidized health care. The working poor’s shortfalls will has become all of our burden, a study by the National Bureau of Economic Research found the less purchasing power the working poor has, the more it contributes to an increase in income inequality. It makes common sense: if what one earns working full time isn’t enough to live on, it makes it nearly impossible to climb out of poverty. 3.8 million workers were paid at or below the federal minimum wage of $7.25 in 2011. Since minimum wage, in many cases, does not cover basic necessities of life, many people that survive on minimum wage spend all or virtually all of the money that they make.
By increasing minimum wage families would not have to rely on government assistance; like food stamps and Medicaid, families would also be able to maybe save money and able to spend to increase our economy. The President's proposal to raise the minimum wage by $.90 would generate $1800 in potential income for minimum wage workers.
Based on expenditure patterns of an average family, $1800 would buy:
Seven months of groceries
One year of health care costs, including insurance premiums, prescription drugs, and out- of-pocket costs
Nine months' worth of utility bills
More than a full-year's tuition at a 2-year college
Basic housing costs for almost 4 months

Raising the minimum wage would improve the economy thought the basic understanding of Economic law of supply and demand. The more money one has, the more product one would be able to purchase and consume. Iniguez (2103) states, “Raising the minimum wage boosts consumer demand, as low-income workers spend their higher wages at local businesses.” Iniguez (2013) goes on to say, “That under the new act, more than 30 million Americans would receive a raise. 43 percent of these workers have some college education and could use the extra money to pay loans off faster.”
People who earn minimum wage do not have the same recourses compared to people who have better paying jobs. Those earning minimum wage are more likely not be able to afford health care. Not possessing health care reduces preventive care, causing employee to take time off for personal illness or family members who become ill. “Insurance does not have society money - but it does appear to make people mentally and physically healthier” (Leonhardt, 2011).
Among minimum wage employees who have very limited financial resources besides health insurance coverage, they usually do not have paid vacation time and the most reliable childcare. Producing extra income can make a big difference in their personal and their family’s well-being. This would increase potential effectiveness in the workplace, by not missing work for personal appointments and lack of childcare. It would also encourage the employee to work harder. Changes in the workplaces are importance to employees. They can also increase positive business outcomes for employers, creating a potential win for both employee and employer.
Possessing money to pay bills, pay off debts only increases personal confidence. Personal confidence leads people to perform better in their jobs and businesses would increase in their profits. This would lead to more people buying more products. Then there would have to be more jobs created to produce the product being purchased.
Companies will no longer provide insurance benefits, or minimum wage to its employees. If the American minimum wage laws forced its businesses to increase the minimum wage, these companies will look into other options, including outsourcing jobs outside the United States, where labor rates are much cheaper. According to Boesler, (2013), @Q
Out of the 20 or more countries listed on The Economist’s Big Mac Index from 2012, the United States has the 7th highest minimum wage on an absolute basis, about the median number," say the strategists. "The absolute lowest federal minimum wage is in Sierra Leone where workers can expect just $0.03/hour. India is the lowest among larger economies with a $0.28/hour rate. Australia is at the opposite end of the spectrum with a whopping $16.88 hourly mandated wage.
Outsourcing occurs when U.S. companies hire foreign workers instead of Americans. When businesses outsource American jobs, they are trying to cut costs. A minimum wage causes companies to minimize business in America and also can create incentives for businesses to hire foreign workers in countries such as Canada, Mexico, and India. American companies may have to outsource out of the United States because they may lose revenue, or have to close their businesses if they cannot find better ways to cut costs to compete with foreign competitors. People in other countries do not benefit from outsourced jobs, and some companies often do not provide humane working conditions. Other countries may hire children to perform outsourced work. To stop companies from outsourcing jobs is to provide more incentives for doing business in America such as tax cuts. Reducing or eliminating minimum wage will improve the economy if companies would start hiring workers in the United States, which would cause unemployment to decrease, keep money circulating within the economy, and improve conditions.
With an increase in minimum wage, businesses from small to large will scale back to the minimum number staff needed to perform the maximum amount of work. Retail stores already impacted by the economy have eliminated full-time associate positions and reduced the number of managers needed to oversee different operations and departments. Larger companies are eliminating part-time jobs and utilizing temp agencies to produce the same amount of work without having to pay for insurance benefits. These cut backs have allowed companies to survive in this economy. Employees receiving the purposed increase in pay will in return be asked to take on more responsibility and duties from the staff reduction necessary to give them the increase. The wage earned should reflect the amount and quality of work completed. Companies will begin to dismiss low performing staff and employees with occurrences or attendance issues. “…an increase in the minimum wage above a competitive equilibrium causes an unambiguous reduction in labor demand.” (Dube, Lester, & Reich, 2011, para. 1). When companies have more to choose from and less available, they can afford to pick and choose more carefully and deliberately from the pool of applicants. When companies can afford to pick the elite applicants there is less need for as much supervision. The restructure of businesses across the country will take effect and result in less work available for those who were considered to have a skill or talent mismatch. Younger generations will find the job market nearly impossible to break into. Why hire a 20 year old high school graduate with no experience for the same amount of money it costs to hire a 30 year old college graduate with 10 more years of work experience? Business restructuring will occur as long as there is a business. Positive outcome or negative depends on the circumstance prompting the restructure.
History has proven that the more money people make the prices of goods and services go up. This is called inflation, and defined as, “a continuing rise in the general price level usually attributed to an increase in the volume of money and credit relative to the available goods and services” (“Merriam-Webster”, 2013). Most of the industries that would be affected by an increase in minimum wage would be entry-level positions like fast food workers and cashiers at local businesses. There is a domino effect that will happen with these companies’ products, starting with their distributors. Their distributers will need to raise prices on their products because they will have to start paying their workers more money to produce these products, thus making the store raise their prices to cover costs to turn a profit. The U.S. government claims that they have factored inflation into the $1.75 minimum wage pay increase. With the extended period that there has been no adjustments in minimum wage, and with inflation increasing, the real value of the dollar has not increased (“Inflation and the Real Minimum Wage: A Fact Sheet,” 2013). There have been some adjustments made to account for inflation of goods and services but this just causes more inflation in prices. There was a substantial inflation increase when the minimum wage rate was raised from $3.35 (1981) to $3.80 in 1990, bringing the inflation rates from 87.5 at the beginning of 1981 to 132.2 by the end of 1990 (“CPI Detailed Report”, 2013, pg. 91, Table. 27). This is a lengthy period but, by looking at the referenced table (“CPI Detailed Report”, 2013, pg.91, Table 27) inflation prices go from intervals of .5 or one to intervals of 1.5 or two. Time has proven that raising minimum wage will cause inflation on Americas’ goods and services.
Our debate although would seem equal on both sides includes the argument that companies will have to raise their prices. What used to be the dollar menu becomes the three dollar menu, which still leaves us broke. The general consensus is that we should not raise the minimum wage due to fact that less government assistance needed or general enjoyment of the job, doesn't cover the fact that people won't have the jobs if they are outsourced to other countries or their hours are cut. When all is said and done people will be making the same money if not less. Wage laws have been fought for over a hundred years. It usually is discussed between minorities such as immigrants, women, or children. Franklin D Roosevelt fought for fair labor standards for everyone for over a year and before that cases went back to 1918 of Federal child labor laws. (Grossman 1978) Representative John McClellan of Arkansas supports our claim of not raising the minimum wage when he rhetorically asked in 1965, "What profiteth the laborer of the South if he gain the enactment of a wage and hour law -- 40 cents per hour and 40 hours per week -- if he then lose the opportunity to work?"(McClellan 1965)

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