Minimum Wage The Questionable Policy Essays - Economy, Business

Minimum Wage: The Questionable Policy As early as 6.00 am in a dark and cold morning of Midwest winter, a few people walking on an icy sidewalk. Under chilling wind, those people walk to a large, old building. Inside the building, the people work for repetitive, backbreaking low waged jobs. In the same day, late at night, you can see similar scene: some people walking out of the building under heavy snowstorm. Being one of those people, I know the feeling of a minimum waged worker. Like all of those workers, I feel exhausted after finishing my job. Everyday, I wait with impatience to hear my supervisor say That is it, turn off the belt. After put off my safety gloves and sweep my sweat, I can only think to return to my room and sleep. I lost most of my time and energy just for a few dollars. There are a lot of people that work harder and earn less than me. The poor, especially less-skilled workers, has access only to bad jobs at bad wages (Blank 64). Those workers always face bad situation. They are poor. They are struggling to sustain the life of their families. On the contrary, the owners of the company where they work have a high standard of living. Bad wage is advantageous for the group of people known as traditional elites who own labor-intensive firms because it lowers production cost, thus increase the competitiveness of the product. For that reason, it is natural for the traditional elites to keep wage as low as possible. This action creates what Karl Marx wrote in The Communist Manifesto as naked, shameless, direct, brutal exploitation (82). The minimum wage seems to be an appealing solution against these abusive exploitations. Applying a minimum wage law, government can force a wealth distribution among the owners and their lowest level workers. On Saturday, June 25, 1938, The U.S. Congress first instituted a minimum wage with the Fair Labor Standard Act. The minimum wage was set at 25 cents per working hour (US Department of Labor). The federal minimum wage is increase overtime, adjusted for higher living cost due to accumulated inflation. The minimum wage level is currently set at $5.15 per working hour (2001). An increase in minimum wage can help the poor by substantial amount. A 75-cent per hour increase in the minimum wage means an additional $1,500 for a minimum wage earner who works full-time, year round as much as the average family spends on groceries in 6 months (Bureau of Labor Statistics). For a minimum wage worker, this fund injection is greatly helpful. Minimum wage increase is undoubtedly favorable for low waged earners, even if their current wage is well above the minimum wage. A theory known as the ripple effects (Welch 26) said that an imposed minimum wage increase all wages, and lowest wages are affected most. There is at least another advantage of imposing higher minimum wage. According to Gregory Mankiw, one of the ten principles of microeconomics is people respond to incentives (7). Higher wages give stronger incentive to the labors, and as a result, a stronger effort to work. In other words, higher wages can generate higher profit. This opinion sounds too good to be true, but when Henry Ford open his famous car factory, the theory is proofed. With a very generous wage in his time, Ford recorded one of the greatest successes in the history. As popularly believed, minimum wage provides a win-win situation to deprive poverty. If it is so advantageous then we should raise the minimum wage with a substantial ammount. The vast majority of Americans will agree to raise the minimum wage to $5 per hour or more. How many will agree to increase minimum wage to $100 per hour? I am sure that most well educated person will not agree to such an extreme increase. According to the law of supply, a high price level will raise the quantity demanded. With a very few exception, this law prevail for all kinds of market, including the market of labor. Thus, an upsurge in the minimum wage will promote the number of people interested to join the labor force. The new labor emerge from