An increase in the statutory minimum wage rate would help the working poor up to an extent. However, if the minimum wage increases by too much, then more people will become unemployed because businesses will be unable or unwilling to hire people and pay them the higher minimum wage. Most economists agree that there is a “tipping point” where the wage becomes too high for businesses to pay. Some economists peg this rate at $9.50 per hour.
If the minimum wage rate went this high, estimates of job losses suffered by the lowest skilled workers would range from 450,000 to 4 million.(1) Studies have also shown that the benefits of minimum wage hikes often go to people who are not poor and that the last wage hike fell short of achieving any poverty reductions.
The next minimum wage increase is scheduled to go into effect on July 24, 2009 and will be increased to $7.25 per hour.(2) With the economy in a deep recession and the unemployment rate at 8.1%, a twenty-five high, it can be argued that the coming increase in the minimum wage rate will increase the unemployment rate further as businesses struggling to stay solvent shed more workers rather than pay the higher minimum wage.
The Essay on Min Wage Minimum Increase Increases
... the ability to pay the rate hike. Percentages: Minimum Wage and Inflation Cox (NA) states that 'The called for increase would move the minimum wage rate from the ... cents. And since the low-wage labor market is characterized by high turnover, high vacancy rates and other inefficiencies, the increased wage helps lower some of ...
It should be noted that many states have their own minimum wage laws in effect. For these states, they must pay the higher of the federal minimum wage rate or the state minimum wage rate. The state of Washington has the highest minimum wage rate of $8.55 per hour.(3) Twenty other states have the lowest minimum wage rate of $6.55 per hour.(3) This is the current federal minimum wage rate. The unemployment rate for the state of Washington is 8.4%.(4)
The average unemployment rate for the twenty states with the lowest state minimum wage is 5.6%.(4) The median unemployment rate for these twenty states is 5.7%. Looking at this data can lead one to conclude that higher minimum wage rates do have a deleterious effect on employment and, thus, do not help the working poor.
Another factor to consider when raising the federal minimum wage rate is the affect it will have on illegal employment of immigrants that are in the U.S. illegally. To avoid paying the higher federal minimum wage rate, some employers are more likely to employ illegal immigrants and pay them much less than the federal or state minimum wage rates.
There has been no definitive research to substantiate this claim but it stands to reason that employers who are apt to not abide by employment regulations will be even more willing to hire illegal immigrants at low pay rather than hire legal workers at the higher federal minimum wage rate.
The federal minimum wage rate is a politically charged issue. With Democrats in the majority in Congress and now in the White House, federal minimum wage rates are likely to increase beyond the next hike scheduled for July 2009 and may very well end up at the “tipping point” rate of $9.50 in the near future.
This would surely test economist’s predictions of an additional 450,000 to 4 million more unemployed workers. In light of the present state of the economy, Congress would be wise to postpone the next minimum wage hike and wait until the economy pulls itself out of its recession before raising minimum wage rates. And even then, it is debatable whether increases in the minimum wage rate have any positive effect on poverty.
The Term Paper on Minimum Wage
Minimum wage is the lowest rate employees may legally pay for an hour of labor (Merriam, 741). The United States has a minimum wage law to guarantee minimum hourly wages and to prevent the exploitation of workers and provide unskilled and part-time workers with a wage floor. People have argues that the minimum wage has become less of a safety net for primary earners in poor families than a floor ...
(1) http://www.epionline.org/index_mw.cfm Would a $9.50 Minimum Wage Rate Reduce Poverty Rates?
(2) http://www.aflcio.org/issues/jobseconomy/livingwages/ Minimum Wage
(3) http://www.bls.gov/LAU/ State Unemployment rates
(4) http://www.toolkit.com/news/newsDetail.aspx?aa=1&nid=07-220askalice State Minimum Wage Rates
