The United States of America’s national minimum wage is currently at $7.25 per hour for most occupations in the private sector. Over the past several years, support for an increase in the minimum wage has come from a wide variety of sources. Many of those who support an increase in the minimum wage believe this is one way the government should exercise its social responsibility in an attempt to reduce poverty. The following items address the idea of raising the minimum wage from the current federal minimum of $7.25 per hour.
- Minimum wage is a price floor, so discuss an increase in the minimum wage from a supply and demand standpoint, making sure to address the concept of surplus with respect to the quantity of labor supplied and the quantity of labor demanded that is generated by this price floor (show your graphs) 25 points
Answer: Regarding the debate on the increase in the minimum wage in private company in the United States of America, I think it should be raised because the increase in the minimum wage hugely abolishes the poverty. This will help the poor and middle-class people to elevate their economic status.
To analyze the increase in minimum wages from the perspective of the supply and demand law concerning the labor, the companies have to pay higher wages to its labors. Similarly, on the part of the labors, they have a good life as rich people because of this increase in wages. Similarly, the increase also might affect the employment, labor demand and supply, and entire economy of the nation but not always with bad outcomes. The neoclassical economists who argue that the rising wages cut off the huge number of employees from the employment because companies cannot afford the high wages to its labors and hire a few of them. To cop up with the increase in the minimum wages, the companies have to reduce their surplus profit to some extent so that both labors and companies have a win-win situation. This may bring harmony between the two classes.
Unlike neoclassical economists, other economists from different schools like David Cooper and Alan Krueger opine that a limited increase in the minimum wage does not cause a negative consequence in the economic system. Rather it helps to increase the number of jobs in the markets and paves the way to abolish the discrepancy between rich and poor. They conclude that their study of restaurant wages increase has not reduced employment at all.
- What will be the impact on the prices of the products produced by workers working at or near the minimum wage level, and how will this affect overall consumer purchasing? 25 points
Answer: There will certainly be an impact upon prices of the goods and services produced by the labors who work at the minimum wage level. An economic principle says that when goods and services are produced by cheap labors, the customer will comparatively have the products at cheap price. This shows that a large number of people likely to make access to products and services. So, the consumers are believed to have a good and high purchasing power. On the contrary, when the minimum wages increase there is also an increase in the price of the products. This increase in the price reduces the demand of products and services as per the economic rules. This means that there is a low purchasing capacity of the costumers because of the high price. So, a few rich people can have purchasing power. Yet, this is not always the case. There are also other factors in the economic system which play a significant role beside this minimum wage increase because the when the demand of services and products are at a higher level, there is also the higher chance of the price-hike. The companies sell a larger number of goods and services with surplus-value. But, on the part of the labors, they are working at low wage who are systematically deprived of getting the share of the surplus. In this situation, the only companies make a lucrative profit at the cost of a large number of labor’s exploitation. In this case, there should be the presence of the government to avoid any kind of exploitation on labors. The government should regulate the companies intermittently. They should not be completely out of regulation in order to maintain human rights, justice, and peace.
- Discuss any potential changes in the incentives for low-skilled workers to increase their human capital, and for employers to substitute capital inputs (technology and automation) for labor. 10 points
Answer: The increase in the minimum wage is one of the greatest incentives for low- skilled workers to increase their human capital. When they have a lucrative payment from the employers, they can invest some amount of income to improve their skills and knowledge by taking the training and joining vocational classes. Similarly, free life and health insurance may be another incentive for labors. This kind of incentive motivates them to work with satisfaction at the companies and their economic status meets its standard. Moreover, in the case of employers, the tax rate decrease may be the major incentive to substitute capital inputs. The government should make consideration on the tax while importing the raw materials from abroad. This will help the corporations grow. Likewise, financial support like a loan with lower interest from the government to invest in the technology might the next main incentive to the employers. The use of technology may produce goods at a larger scale. This benefits the employers and feels financially being secured as well.
- What might be the impact on government spending on entitlements such as welfare, food stamps, and unemployment compensation in light of the fact that changes in the minimum wage can create changes in unemployment and underemployment? 25 points
Answer: The crucial impact brought by minimum wage increase that can be seen, is a less burden for the government spending on entitlements such as welfare, food stamps, and unemployment compensation. The government gradually cuts off the huge investment in social and financial improvement of its citizens because the people can, own their own, afford expenditure on food, health, education, and recreation. The people will no longer rely on the government’s safety net programs. The unemployment and underemployment will be solved and the nation will be in the brim of richness. The poverty ratio will seemingly be decreased to the level of abolishment. The government will invest those expenditures in another development sector like infrastructural development. Similarly, the increase wages increase the spending as well so that it raises the demand and creates more jobs opportunities. More importantly, it assists the government to reduce the unemployment problem and increase the national revenues that are a huge achievement in the economic system of the nation.
5). Based on your responses, do you believe that the minimum wage should be raised, lowered, remain as it currently is, or be altogether eliminated? Explain your answer, and make sure to address any social responsibility the government should have regarding the well-being of its citizens with respect to the setting of wages in the private sector. 15 points
Answers: In my opinion, the United States of America’s national current minimum wage in private sectors should be increased from the current wage of 7.25 dollar per hour. This current wage is not enough for the labors or the employees to live a quality of life. They are not able to spend on things like recreation and saving in the bank account for the future which is the necessary component of the qualitative lifestyle. For instance, they cannot afford to go to a fine restaurant to eat out. Similarly, because of the same problem, people are deprived of having access to modern luxurious facilities. This is where we realize the government responsibilities of its citizen welfare. The government must pay attention to the working class and middle-class people’s poor situation. Therefore, to solve all these social and financial crisis and problems, the need for the minimum wage increase is a must. The government must have a role to set up the minimum wage considering the middle-class people and poverty of the nation.
To sum up, the increase in the wage does not bring devastating chaos in the employment field and in the phenomena of demand and supply of labor because the government regulation upon the private companies must be implemented. The private companies should lessen their degree of the profits and surplus values so that there is an equilibrium environment in the economic system and between the relation of labors and the owner of the companies. This government policy and law strongly protect the right of the labors and investors as well. This is what the government’s social and financial responsibilities for the wellbeing of its citizens.