mico economics and th minimum wage

Minimum Wage The minimum wage has been a part of the United States labor system since I can remember. However there has not always been a minimum wage. What were the causes that made out government step in and enforce a minimum wage and how does this affect our economy today? During The Great Depression of the 1930’s there was no national minimum wage or legislation to protect workers. There were few jobs and many people willing to work. This caused wages to drop drastically. People were forced to work in sweat shops, and horrible conditions for hours on end for little to no money .There had been attempts to create a minimum wage but there were ruled unconstitutional by the US Supreme Court. They said that a minimum wage would “restrict the workers right to set the price for his own labor”. In 1936 President Franklin D. Roosevelt promised to combat the nation poverty issue and protect the American workers if he was re-elected. The re-elected President signed the Fair Labor Standards Act in 1938. “The FLSA introduced sweeping regulations to protect American workers from being exploited, and created a mandatory federal minimum wage of 25 cents an hour in order to maintain a "minimum standard of living necessary for health, efficiency and general well-being, without substantially curtailing employment".1 Employees loved this new law however, employers were outraged. Most importantly this law banned child labor. Since 1936 the FLSA, the federal minimum wage has been raised by congress every few years. This is to take into account for inflation and the rising cost of living.
Year
Wage

Year
Wage
1939
30 cents

1976
$2.20 / $2.30
1945
40 cents

1977
$2.30
1950
75 cents

1978
$2.65
1956
$1.00

1979
$2.90
1965
$1.25

1980
$3.10
1967
$1.00 / $1.40

1981
$3.35
1968
$1.15 / $1.60

1990
$3.80
1969
$1.30

1991
$4.25
1970
$1.45

1996
$4.75
1971
$1.60

1997
$5.15
1974
$1.90 / $2.00

2007
$5.85
1975
$2.00

2008
$6.55

Year
Wage
2009 – Current
$7.25

In 1997 President Bill Clinton put into legislation a bill that would allow individual states to set their own minimum wage rates, and as a result several states have minimum wages that are higher than the federals minimum wage (http:// www.minimum-wage.org/history.asp). Jumping forward to more recent times, the minimum wage was set at $7.25 per hour in July of 2009. This affected 29 of the states. The rest had already had a n equal or higher minimum wage. This income resulted in $14000.00 per year. Guidelines had been set for the poverty level in 2009. For a family of two the poverty level would be $14,750.00. For a family of four the poverty level would be $22,050.00. The minimum wage was close to meeting the poverty level, but just there. People were working hard, but un able to improve their quality of life.
Now as we take a look at 2013, the minimum wage rate has stayed the same since 2009. There has been inflation and the cost of living has sky rocketed. In 2013 the cost of living for a family of two is $19,000.00. This is nowhere near what workers are making per year. Americans are working 40 hours a week to live at or below the poverty level. President Obama wants to raise the minimum wage to $10.10. There are two choices to make. Raise minimum wage or leave it where it is. There are arguments for both. First let’s take a look at the argument that raising the minimum wage would benefit the United States and its economy. A higher minimum wage would raise workers incomes. This is much needed to boost demand and get the economy going. “Raising minimum wage would also reduce turnovers in companies and keep more people off of unemployment. Those lobbying for a higher minimum wage focus on the fact that federal minimum wage, as it is now, is an insufficient living wage for workers. “The efficiency wage theory of labor holds that higher real wages improve labor productivity by reducing worker turnover and the associated costs of hiring and training new workers, by reducing the incentive for workers to unionize, and by increasing the opportunity cost of being fired—thereby giving the worker incentive to be more productive. Under this view, small increases to the minimum wage will have no deleterious employment effects.” The current level of the minimum wage is very low by any reasonable standard. For about four decades, increases in the minimum wage have consistently fallen behind inflation.”( http://www.minimum-wage.org/history.asp) Secondly, Economist argue that raising the minimum wage in our stagnate economy will hurt us in the long run. Adversaries of raising the minimum wage argue that mandating a higher minimum wage may help individual workers, it would be damaging to the economy as a whole. A minimum wage hike, they claim, would put too much financial pressure on already struggling businesses. This pressure on employers would force them to spend less on American goods and services, and even force them to lay off existing workers. This would especially apply to young or inexperienced workers that the businesses cannot afford to continue paying at the newly raised minimum wage rate. The damage caused by a minimum wage hike, they claim, would far offset any economic benefits created by giving minimum wage workers a small amount of extra spending power.( http://www.minimum-wage.org/history.asp)
“Milton Friedman once described the minimum wage as a requirement that “employers must discriminate against people who have low skills.” As Anthony Davies explains, “the minimum wage prevents some of the least skilled, least educated, and least experienced workers from participating in the labor market because it discourages employers from taking a chance by hiring them. In other words, workers compete for jobs on the basis of education, skill, experience, and price. Of these factors, the only one on which the lesser-educated, lesser-skilled, and lesser-experienced worker can compete is price.” Who’s to say what is right and wrong. I strongly believe that raising the minimum wage continuously at a slow rate will not affect the economy poorly. I believe it will bring people out of living on the poverty line, boost the economy and only make people work harder.

Resources http://www.dol.gov/whd/about/history/whdhist.htm http://www.minimum-wage.org/history.asp http://www.americanprogress.org/issues/labor/news/2013/12/03/80228/raising-the-minimum-wage-would-help-not-hurt-our-economy-2/ http://thinkprogress.org/economy/2013/02/12/1583381/obama-raise-minimum-wage/ http://www.cluecho.com/2013/03/raising-minimum-wage-will-hurt-the-economy/ http://www.minimum-wage.org/history.asp http://www.thedigeratilife.com/blog/federal-minimum-wage-history/ http://economy.money.cnn.com/2013/02/14/minimum-wage-history/ http://www.dol.gov/opa/media/press/whd/WHD20131922.htm http://www.usatoday.com/story/news/nation/2013/01/28/minimum-wage-increases/1862355/