Public Policy Dealing With Minimum Term Paper

  • Length: 8 pages
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  • Subject: Careers
  • Type: Term Paper
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3 million workers who would indirectly receive raises due to the spillover effect of a minimum wage increase. ("Minimum Wage: Frequently Asked Questions")

Some people have argued that increasing the minimum wage does not help to reduce poverty since most poor people do not form part of the labor force. This may have been partially true in the past when many poor families did not have any family members in the paid labor force. According to the Economic Policy Institute, however, a minimum wage increase is likely to have a greater impact on reducing poverty in future as welfare reform is now forcing more poor families to rely on their earnings from low-paying jobs. Certain studies such as the one by Addison and Blackburn (1999) found that federal minimum wage increases in the 1990s have reduced poverty rates, and another study (Sawhill and Thomas, 2001) suggests that a minimum wage increase from $5.15 to $6.15 in the U.S. would lift nearly 900,000 people out of poverty (Ibid.).

Social Benefits a number of other social benefits can also be attributed to an enhanced minimum wage. For example, being able to pay for their basic needs through their own earnings, rather than by handouts, adds an immeasurable amount of meaning and dignity to one's lives. Increased minimum wage would, also benefit the society in other ways too as a fair minimum wage would help build the local tax base and would reduce the spending of local taxes on social assistance programs. It would also lift the morale of the workers, contributing significantly to higher productivity, which in the end lifts the overall economy. Minimum wage increase benefits the most deprived section of the society -- the minority working women, the African-American and the Hispanics -- who are employed in the lowest-wage jobs. (Haussamen)

Public Opinion Public opinion in the U.S. has consistently been in favor of minimum wage law. One survey, for example, shows that the American public favors raising the federal minimum wage to $7.15 per hour by an overwhelming margin of 83% to 14%, and nearly half (49%) say they strongly support such an increase. Although the support for an increase is more pronounced among the Democrats (91%) and the poor, even a majority of the Republicans (72%) and the rich favor such an increase (Dimock). The across the board support for increase in the minimum wage levels among the general public is in stark contrast to the opinion held by the economists and the law makers, although this trend has also been reversed to an extent in recent years. (Chipman)


Having gone through the arguments for and against the policy of minimum wage, what strikes me as most callous is the insistence of the laissez faire economists to treat "labor" strictly as just another commodity. If one views the issue of minimum wage with such a sweeping assumption and ignore the humanitarian aspect of the issue, the conclusions drawn by the opponents of a minimum wage policy are perhaps understandable. What is less understandable is that the same economists, who incidentally are the most vociferous opponents of minimum wage, have the temerity to suggest that they oppose the policy because it "hurts those at the bottom of the ladder most." This, belated "concern for the poor," to my mind, is sheer hypocrisy. What the opponents, of a minimum wage law, seem to be really concerned about is a feared decline in profits of businesses. For the profit motive is the be-all and end-all for supporters of a 'no holds barred' capitalist economy; other arguments being thrown in as a smokescreen for their real motive.

As is so clearly brought out in the research by the Economic Policy Institute, millions of workers in the United States (a full 11% of the total workforce) are likely to benefit from a proposed increase in the federal minimum wage from the current $5.15 per hour to $7.25 by 2008 ("Minimum Wage: Frequently Asked Questions"). Any measure that is likely to benefit so many people who are presently hard-pressed to make ends meet is worthwhile, especially when the policy is likely to have no, or at the most, minimal adverse effects. Moreover, the proposed increase would do no more than restore the current minimum wage levels to historic levels, as they have fallen drastically in real value due to inflation since the last increase in 1997.

The other reason why it is important to raise the minimum wage to a reasonable level is to check 'economic inequality' that has reached alarming proportions all over the world in recent times, and continues to worsen. The widening gap in the incomes of the rich and the poor is one of the biggest challenges facing the capitalist system, and if left unchecked, could threaten the very fabric of our societies. The minimum wage law is one of the proven tools that can help to lift a significant proportion of the population above the poverty line. One research study by Sawhill and Thomas (2001), for example, suggests that a minimum wage increase from $5.15 to $6.15 would lift nearly 900,000 people out of poverty in the U.S.

In the end, I would like to point out that after the collapse of the Communist system in the Soviet Union and Eastern Europe in recent decades, the world seems to have been intoxicated by the virtues of a free market economy. We must, however, remember that an unchecked market is not a panacea for all our ills, just as Socialism / Communism flattered to deceive its starry eyed followers in the last century. The Great Depression of the 1930s was warning enough against the dangers of a blind faith in the virtues of a free, unchecked market. It is the duty of the government to protect the most vulnerable sections of the society and prevent too unequal a distribution of incomes. A minimum wage law is one of several tools available to the government for doing so.

Works Cited

Chipman, Kim. "Higher Minimum Wage No Longer Seen as Sure-Fire U.S. Job Killer." Bloomberg. Com. March 14, 2007

Dimock, Michael. "Maximum Support for Raising the Minimum." Pew Research Center Publications. April 19, 2006. March 14, 2007.

Haussamen, Brock. "Overview: The Benefits of Raising the Federal Minimum Wage." The Minimum Wage: Information, Opinion, Research. N.d. March 14, 2007.

Hoar, William P. "Minimum Wage, Maximum Absurdity." The New American 28 Nov. 2005: 42+.

Kibbe, Matthew B. "The Minimum Wage: Washington's Perennial Myth." Cato Policy Analysis No. 106 May 23, 1988. Cato Institute. March 14, 2007

Minimum Wage: Frequently Asked Questions." Economic Policy Institute. January 2007. March 14, 2007.

Nordlund, Willis J. The Quest for a Living Wage: The History of the Federal Minimum Wage Program. Westport, CT: Greenwood Press, 1997.

Q&a: The Minimum Wage with Brock Haussamen." North West Progressive Institute. May 05, 2006. March 14, 2007.

Questions and Answers About the Minimum Wage." U.S. Department of Labor. 2007. March 14, 2007.

As proposed in the Minimum Wage Bill currently pending in the U.S. Congress

Indirectly affected" are those workers who are earning within a few dollars above the proposed minimum wage. Empirical evidence shows that most employers raise the wages of workers earning above the new minimum wage in order to preserve internal wage structures, which is known as the "spillover effect."

Nine-in-ten people whose household income is under $20,000 annually support an increase to $7.15 an hour, while 7% are opposed. Among those with household incomes of $75,000 or more, 76% favor the idea, while 22% are opposed.

Refer to the study by David Card and Alan Krueger (also quoted earlier in this paper), which showed that there was no increase in unemployment in New Jersey when it raised the minimum wage rates above the federal rate in the 1990s

The increase assumed in the study, i.e., to $6.15 per hour is less than the increase to…

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