Everything You Need to Know About Minimum Wage: Part I

The topic of minimum wage has been under discussion for quite some time.  It is one of the United States’ most controversial political issues because there are many different ideologies surrounding the proper value of the minimum wage floor.  Over the past several months it has received much more attention due to President Obama’s State of the Union declaration of raising the minimum wage for all new federal contracts to $10.10.  This comes just one year after he urged Congress to raise the minimum wage to $9 per hour in his 2013 State of the Union.  Currently, the minimum wage stands at $7.25.  The present-day wage contributes to about 49 million Americans (14.5% of the U.S. population) living impoverished.

Minimum wage is such a debated issue because of the paradigm it creates for unskilled laborers.  Economists and politicians often argue that the wage levels should differ because unskilled workers are earning more money than they should.  We have this predicament because it is difficult to place a value on labor in the first place.  On the other hand though, skilled workers who may have been unemployed before taking a minimum wage paying job are now working for pay that correlates to living below the poverty line (a full-time employee earning $7.25/hour will make $15,000 a year, which is below the poverty level for a family of three).  Moreover, other analysts and politicians (Republicans) argue that raising the minimum wage will result in less job creation and more unemployment.  On a strictly economic and financial basis, I can understand this point of view.  Logically speaking, why would business owners offer more jobs to prospective employees if they must allocate more money for wages?  Economics is based on the belief that all decisions are made rationally, and rationally speaking, I would not provide job opportunities for people if it were more expensive for my business.  I will look more in-depth at this scenario in part three of my series.

As an attempt to improve our nation’s current economic situation, President Obama has signed an executive order that will raise the wages of all new federal contracts to $10.10 per hour.  Notice, this executive order only affects all new contracts, so, unless restructured, all old contracts will remain at $7.25 an hour.  While this only makes a dent in the overall conversation of minimum wages, it is expected to affect more than 2 million employees.  Furthermore, it will hopefully spark an initiative by our legislative branch to pass the Fair Minimum Wage Act, which will effectively raise the minimum wage to $10.10 for all laborers across the country by July 1, 2015.

In part two of my series, I will focus on three principle ideas regarding the potential increase of minimum wage, all of which are positive and outline the possible benefits of such an appreciation.  In the meantime, read up on the Fair Minimum Wage Act and it’s economic implications.

Maxwell

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