Minimum Wage Term Paper

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Minimum Wage

Even though minimum wage has been around for many years, and was established to make sure that working people could survive and pay their bills, there are still many problems with it. This paper address both the pros and cons to raising the minimum wage, discussing not only how people can be helped by the increase in pay, but also how they are ultimately hurt by it to a larger degree. Organized labor usually fights to raise the minimum wage, but every time it goes up, prices follow, until those that make minimum wage end up worse off than they were before their wage increase.

Some states also have minimum wage laws, and often the state minimum wage is higher than federal minimum wage. When the federal minimum wage is raised, states are at a loss with whether to raise theirs or not, and sometimes employers go out of business because they cannot afford to pay their employees any more. The increase in minimum wage is good only for a short period, until prices and payroll catch up. In the long run, it hurts more than it helps, and many people are affected. The main argument of this paper is that minimum wage should never be raised, and there should be ways to solve the financial problems that come with the lower-income jobs in this country other than causing financial harm to countless other individuals and businesses.

Raising the Minimum Wage


The federal minimum wage has been around for many years, and there have always been arguments over it. Much of the upset that has come about over the federal minimum wage has been dealing with whether or not it should be raised. There have been many fights about this issue and the minimum wage has been raised several times in the past. Now lawmakers are discussing raising it again. However, it would seem that every time the minimum wage is raised prices rise and therefore the raising of the minimum wage does not actually benefit those that most need it.

In order for there to be any real benefit to raising minimum wage, prices would have to remain the same. Otherwise the individuals who are now making more money would also be paying out more money for the groceries that they buy and other items that they need to live their lives.

The purpose of this paper is to show that there are both pros and cons to raising minimum wage but ultimately raising the minimum wage in this country only makes it more difficult for those that still struggle to get buy. The paper will begin with historical information about minimum wage and then move on to the pros and cons of raising it. The summary and conclusion will explain the reasons that minimum wage should not be raised and indicate that there must be some other way to help out individuals in this country who are struggling to pay their bills and put food on the table.

Historical Information

Historically, minimum wage has been through a great many changes. It is designed to be the lowest wage that an industry can legally pay in the United States (Minimum, 2004). Minimum wage was originally established to ensure that all individuals could have a standard of living that would provide them with a reasonable amount of health and decency. There have been many ways in the past that minimum wage has been changed. These include collective bargaining from labor unions, by board action, by arbitration, and by legislation (Minimum, 2004). Almost all countries have a minimum wage and originally in the United States minimum wage laws were believed to be unconstitutional.

Organized labor fought very strongly and when the labor standards act was passed in 1938 minimum wage was set at 25 cents per hour with a few exceptions. Recommended rates for various industries were established and the minimum wage was raised in 1950 to 75 cents per hour (Minimum, 2004). It was raised several more times and in 1974 a bill was passed by Congress which allowed gradual increases from the $1.60 per hour to $2.30 per hour by 1976. Some of the minimum wage rules also became available to 8 million workers that had not previously been covered by them (Minimum, 2004). These included the employees of both state and local governments, some employees of various chain stores, and most domestic workers. Minimum wage has continued to rise and finally reached its current rate of $5.15 per hour in 1997. Congress attempted to raise the minimum wage to $6.15 an hour over a two-year to three-year period in 1999. Not all businesses are required to pay their employees minimum wage, however. Any business that earns less than $500,000 per year has not been required to follow minimum wage rule since 1989. There also a number of states that have chosen to set their minimum wage standards higher than what the federal minimum wage actually requires (Minimum, 2004).

Pros to Raising Minimum Wage

There are both pros and cons to raising minimum wage just as there are with any issue. Naturally, everyone likes to make more money and those individuals that are at the low end of the spectrum when it comes to earning wages would be happy to see more money in their paychecks. However, there are cons that will be discussed in the next section that relate to this raising of money. Another good reason to raise the minimum wage is that these individuals that now have more money will be inclined to spend that money on more goods and services which will help businesses and the struggling economy (Burkhauser, Couch, & Wittenburg, 1996).

These individuals will also be able to afford some of the things that they have not previously been able to have such as health-care insurance and other items that normally cost them enough out of their paychecks that they have not been able to purchase these things. They can start investments or retirement accounts if they are careful with the extra money that they earn and many of these people will be able to enjoy a better quality of life for not only themselves but their children and their extended families as well (Burkhauser, Couch, & Wittenburg, 1996).

Raising minimum wage helps out the entire economy for a while because the individuals that have more money are more likely to spend it rather than save it for a time when they may need it most. These individuals are often much happier with their newly found income and they may spend money to purchase new cars, buy new homes, or start families. All of these things contribute to an economy that is rising and doing better than it would have done had the minimum wage not gone up (Burkhauser, Couch, & Wittenburg, 1996). A raise in pay is a comforting thing to many individuals and they will often plan what they are going to do with this money in such a way that is often spent before they ever receive it.

Cons to Raising Minimum Wage

Just as there are good reasons to raise minimum wage there are also reasons that it should remain the same. The largest one of these is the fact that every time minimum wage goes up it is not long before prices also rise (Brown, 1988). This means that all of the extra money that these individuals are earning is for naught because they are not able to do anything else with it. It all goes to goods and services that they already buy and they are not actually able to get ahead any further than they would have been able to had minimum wage remained the same. It also makes no difference to raise minimum wage in states that already have a minimum wage which is higher than the federal level (Brown, 1988).

These states cannot benefit anything by the raise in the federal minimum wage because they already have higher rates. It is then up to them whether they choose to pay extra money or allow the federal minimum wage level to gradually increase until it corresponds with the level that they have already set (Brown, 1988).

Another reason that minimum wage should not be raised has to do with those that have to pay the employees their wages (Brown, 1988). Many of these individuals are struggling to get by in the current economy and requiring them to pay more money to their employees can put them out of business or cause them to lay off employees so that they will be able to afford to make their payroll. It can also cause them to raise prices, which corresponds to the aforementioned issue about prices going up every time minimum wage rises.

Many of these business owners are struggling to pay what they already owe to their employees and if they are forced to pay more they will not be able to do…[continue]

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