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Minimum Wage Effects on the American Economy

Minimum Wage Effects on the American Economy - Minimum Wage...

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Minimum Wage Effects on the American Economy Economics 1B - Principles of Microeconomics Professor Lawrence Fall 2009
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Minimum wage is a legal price floor set by a government that establishes a minimum per hour that an employer must pay their worker. Equivalently, it is also the legal minimum that a worker may charge for their labor. The Fair Labor Standards act first established a minimum wage requirement to ensure that all workers have a fair chance at a decent standard of living. The law has caused much controversy between Americans. Supporters say that it raises the standard of living for many workers while simultaneously reducing poverty. Opponents say that the minimum wage significantly lowers the demand for labor for many different reasons. Both sides of the argument have a valid point, but one must examine them both equally in order to make an accurate judgment on the effectiveness of the federal minimum wage which is currently stated on the United States Department of Labor website, “The federal minimum wage for covered nonexempt employees is $7.25 per hour effective July 24, 2009.” Supporters of the minimum wage rally their argument on two fundamental points: a) the standard of living of a worker rises and falls with their wages b) a regulated wage will keep people above the poverty level and will bring people who obtain minimum wage jobs above the poverty level as well. According the online dictionary website, dictionary.com, standard of living is defined as a grade or level of subsistence and comfort in everyday life enjoyed by a community, class, or individual. An argument for the minimum wage is that an established wage must be created so that many can enjoy a higher standard of living. It is common knowledge that generally if a worker makes more money, he has more leisure money to spend and therefore has an increased standard of living. A main goal of the Fair Labor Standards act was exactly that, to allow individuals to have the opportunity to earn income at a point where leisure expenditures are executable in order to heighten their standard of living. At the current minimum wage of $7.25 a worker putting in forty hours a week of labor would make roughly $16,000 per year.
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According to the US Department of Health and Human Services the poverty threshold for an individual is nearly $11,000 of income per year. That suggests that the federal minimum wage keeps workers above the poverty line by a $5000 margin. Therefore supporters argue that if the minimum wage were to be abolished, many workers, approximately 2+ million workers,
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