FREE ESSAY ON MINIMUM WAGE: THE QUESTIONABLE POLICY

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 many different groups. Some of them are people known as
discouraged workers, labors who are no longer eager to find any job. There will be no
negative effect from this new force. There are also strong correlation between female
employment and wage level. More mothers will leave their children as a result of higher
minimum wage. On one hand, it means a higher family income. On the other hand, it can
create some psychogical effect on the children.
Another groups that possibly enter the job market is the teenage worker. Statistical data
shows a strong trend that this is the group that most influenced by the minimum wage
level. Typical study finds that a 10 percent increase in the minimum wage depresses
teenage employment between 1 and 3 percent (Mankiw 127). High minimum wage encourages
more teens to work on part time or full time job. This action require these teens worker
to reduce their studdying time. In some cases, it is done by dropping out from school. In
long term, high drop out rate among highschool or college students due to enchanced wage
is disadvantegeous to the society as a whole.
On the demand side, a minimum wage means higher cost to hire new worker. A minimum wage
raise leads to a drop in the employment opportuinities. Business are encouraged to reduce
their labor force size and apply more machinary that require less worker. This
phenomenon, together with an increase in labor force supply side, take the whole society
to a high unemployment level. 
Although economists frequently have opposing arguments, they speak in unisound that
minimum wage produce unemployment. There are a lot of studies, especially those funded by
the Department of Labor, that conclude that a raise in minimum wage does not cost jobs. 
Those studies are reasonable in the short run. Firms cannot reduce their employment
immediately and students will not dropped their school instantly. But in the long run,
firms will start to purchase more worker-efficient machinary or reduce the size of their
business. More teenagers choose to work directly after finishing their highschool rather
than enrolling in college. All of these factors will drive up unemployment among
less-skilled workers. A lot of critics said that minimum wage is "hurting those it is
intended to help" (Mankiw 451). Workers who remain employed are gain some benefit from a
higher wage, but those who loose their jobs are worse off.
Even if minimum wage law really benefit the low-waged workers, it is a poorly targeted
policy. Most of the minimum wage workers are second or third earners in their families.
They are dominated by teenagers from middle class families who work on part time job. In
fact, only about "one-fifth of minimum wage workers live in poor families" (Blank 115).
Furthermore, not all of them are the main workers in their families. 
As one of the low wage workers, I will benefit from a higher minimum wafe. But higher
wage means that I will easily loose my job. Moreover, a high payment for bad jobs will
reduce my desire to pursue my college carreer. Because of the above reasons, minimum wage
is not a very attractive policy. It is poorly targeted, encourage teenagers to drop their
school, and creates unemployment. In an economist point of view, like many other free
market interference, the policy is more destructive than productive. As the vice chairman
of the house of representative Jim Saxton said, "the minimum wage cannot repeal the law
of supply and demand any more effectively than they can repeal the law of gravity".
Bibliography
Blank, Rebecca M. It Takes a Nation: a New Agenda for Fighting Poverty. Princeton,1997
Joint Economic Committee. Evidence against a Higher Minimum Wage. Washington, D.C: U.S
Government Printing Office, 1996. 
Mankiw, N. Gregory. Principle of Macroeconomics, 2nd edition. Orlando:Harcourt College
Publishers, 2000
Mankiw, N. Gregory. Principle of Microeconomics, 2nd edition. Orlando:Harcourt College
Publishers, 2001
Marx, Karl. The Communist Manifesto. Chicago: Henry Reginery Company, 1848/1954
US Department of Labor Welch, Finis. Minimum Wages: Issues and Evidence.Washington, D.C,
1978