Minimum Wage Term Paper

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[. . .] Those that will find ways to pay their employees a higher minimum wage will often compensate by losing things in other areas such as health insurance or other benefits that the employees previously enjoyed. These employees may have slightly more money in their paychecks but many of the other benefits that they already have will be lost to this (Brown, 1988).

The tables below, reprinted from Regulation: the Cato Review of Business and Government, would appear to indicate that the raising of the minimum wage actually increases the unemployment rate because it becomes harder for teenagers and young people that traditionally take lower-paying jobs to find them. Most individuals that work in these lower paying jobs do so for a period of time in order to work their way through college or other training that allows them to get a higher paying job. In the meantime, they need this money so that they can get through their schooling and be able to survive and buy the supplies and things that they need.

Because of this, the raising of minimum wage takes away many of these jobs that these people would previously have applied for and worked in, and therefore the amount of employed individuals in the 15 to 19 and 22 to 24 age groups actually fall when minimum wage rises. The same is also true for women because they traditionally earn lower wages and many of them work part-time jobs outside of the home to bring in extra income while their children are in school. These individuals are also hurt by this because many of them can no longer find the minimum wage and low-paying jobs that they normally worked in.

Table 1

Percentage Employed by Age Groups

before and after 1990-91 Minimum Wage Hikes

Men Employed

Age Group

Percentage

low wage1

Percentage

before hikes2

Percentage

after hikes3

Percentage

point change

Total

percentage reduction4

15-19

44.5

43.0

36.3

-6.7

-15.6

20-24

14.2

77.7

73.3

-4.4

-5.7

25-64

3.3

85.9

83.8

-2.1

-2.4

65-69

14.0

26.2

25.1

-1.1

-4.2

Women Employed

Age Group

Percentage

low wage1

Percentage

before hikes2

Percentage

after hikes3

Percentage

point change

Total

percentage reduction4

15-19

51.8

41.4

36.0

-5.4

-13.0

20-24

19.0

66.9

64.1

-2.8

-4.2

25-64

8.8

66.5

66.3

-0.2

-0.3

65-69

21.0

15.9

16.4

+0.5

+3.1

1. Percentage paid low wages, i.e., less than or equal to $4.25/hour, between April 1, 1989 and March 31, 1990, prior to minimum wage hike.

2. Percentage of total age group population employed between April 1, 1989 and March 31, 1990, prior to minimum wage hike.

3. Percentage of total age group population employed between April 1, 1991 and March 31, 1992, when full minimum wage hike took effect.

4. Percentage reduction off the base of all individuals employed prior to minimum wage hike.

Table 2

Percentage Select Low-Wage Populations Employed

before and after 1990-91 Minimum Wage Hikes

Men Employed

Demographic

Group

Percentage

low wage1

Percentage

before hikes2

Percentage

after hikes3

Percentage

point change

Total

percentage reduction4

High School Dropout

20.7

46.6

43.5

-3.1

-6.6

Black

11.0

60.0

57.1

-2.9

-4.8

Mexican Descent

15.6

74.4

70.8

-3.6

-4.8

Single

15.1

64.0

61.2

-2.8

-4.4

25-64 Years of Age

3.3

85.9

83.8

-2.1

-2.4

Women Employed

Demographic

Group

Percentage

low wage1

Percentage

before hikes2

Percentage

after hikes3

Percentage

point change

Total

percentage reduction4

High School Dropout

35.4

28.9

26.8

-2.1

-7.3

Black

16.9

50.9

49.2

-1.7

-3.3

Mexican Descent

21.9

48.2

45.6

-2.6

-5.4

Single

18.4

51.1

49.4

-1.7

-3.3

25-64 Years of Age

8.8

66.5

66.3

-0.2

-0.3

1. Percentage paid low wages, i.e., less than or equal to $4.25/hour, between April 1, 1989 and March 31, 1990, prior to minimum wage hike.

2. Percentage of total demographic group population employed between April 1, 1989 and March 31, 1990, prior to minimum wage hike.

3. Percentage of total demographic group population employed between April 1, 1991 and March 31, 1992, when full minimum wage hike took effect.

4. Percentage reduction off the base of all individuals employed prior to minimum wage hike.

Table 3

Men

Women

Blacks

Teenagers, 15-19

Effect of Increasing Minimum from $3.35 to $3.80

-4.8

-6.6

-7.5

Effect of Increasing Minimum from $3.35 to $4.25

-7.3

-11.4

-10.0

High School Dropouts, Adults 20-54

Effect of Increasing Minimum from $3.35 to $3.80

-1.5

-2.5

-4.4

Effect of Increasing Minimum from $3.35 to $4.25

-3.1

-5.2

-6.7

Note: Change for selected low wage groups adjusted for changes in aggregate employment. Men and women refer to all races. Blacks refers to both Men and women.

Summary and Conclusion

As can be seen from the discussion of the pros and cons to raising the minimum wage there are good points to doing this but they are overshadowed by many of the difficulties that these individuals would face. The main issue is the fact that these individuals will be spending all of the extra money that they are making to buy the goods and services that they already enjoy. It will be as though the increase never happened because the prices will rise to compensate for the amount that minimum wage has gone up.

This is obviously a concern for others as well because even those that make over the minimum wage do not want to see prices rise. While there are people in this country that are very rich many work for minimum wage or just slightly above this. If minimum wage would go to $6.15 per hour those that are currently making 7 dollars per hour would be hurt by the price increases that would come from the rise in minimum wage.

The only way to offset this is to raise the income of these other individuals that already make over minimum wage as a cost of living increase. This will help them to compensate but can also cause prices to rise yet again. This being the case, those that had worked for minimum wage and seen their paychecks rise would notice that the cost of living had gone up to an extent that they actually appear to be making less than they were before minimum wage was raised. This is a disservice to the people… [END OF PREVIEW]

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