Minimum Wage and Public

Public Policy of the Minimum Wage

Public Policy on minimum wage in the United States has shifted focus in recent years. Many in the public and in the White House have sought to raise the national minimum wage to $15 per hour. This is what many find to be a decent living wage that may help those in poverty or near poverty. The past has seen introduction of the minimum wage in the United States beginning around the Great Depression. Then, the standard minimum wage was 25 cents. In order to match the value of those 25 cents, today's minimum wage would have to be $10.

Progress has been made in the last two years with regards to increasing the minimum wage. Some states like California have already adopted legislation to gradually increase the minimum wage to $15 in the upcoming years. New York City and Seattle are not far behind. Still, enough has been done to secure the goal of increasing minimum wage, affecting millions of impoverished Americans.

By examining efficiency wage theory and delving into qualitative research, this paper hopes to provide clarity on the origins of the movement towards higher national minimum wage and what efforts are being done at the local and state levels to improve minimum wages. This qualitative study will examine research articles and literature from the last 4 years to see if sufficient changes have been made to deliver the promise of higher minimum wages and the impact higher minimum wages have already had on countries that have adopted them. Lastly, the paper will include an example of an organization making efforts towards changing public policy for minimum wage. This section will allow the examination and interpretation themes, questions, and observations, that may be added in the study. Minimum wage efforts are everywhere and some organizations like raisetheminimumwage.com have made significant progress.

Introduction

The origins of the United States first national minimum wage came from the minimum wage law. The minimum wage law "was created as part of the Fair Labor Standards Act of 1938, a legislative measure intended to curtail 'labor conditions detrimental to the maintenance of the minimum standard of living necessary for health, efficiency and general well-being of workers" (p. 134).[footnoteRef:1] The act came towards the end of the Great Depression (1929-1939). Meant to provide a living standard for Americans through a set minimum pay for all American workers, the minimum wage law provided a guaranteed hourly pay for all legal jobs. As Royce details, the minimum wage law is not indexed based on inflation. Furthermore, the only way to increase the minimum wage is through approval by the Congress and state and local representatives. [1: Edward Cary Royce, Poverty and Power: The Problem of Structural Inequality (2015), p. 134.]

The minimum wage established a floor of hourly earnings. It is not indexed to the rate of inflation, however, so its real value declines over time as the cost of living increases. Whether the minimum wage is raised, how often, and by how much is a matter decided by Congress and state and local representatives" (p. 134).[footnoteRef:2] [2: Royce, Poverty, 134.]

This explains why the minimum wage in the United States has taken so long to increase. Because there is so much resistance from various forces concerning the national minimum wage, any progress made has been slow. If the United States is to adopt a higher minimum wage, it may prove beneficial to the poor of the United States more than several ways. One of which is health, specifically as it relates to healthcare and infant mortality. A recent study analyzed the effects a higher national minimum wage had on infant mortality.

Across all models, a dollar increase in the minimum wage above the federal level was associated with a 1% to 2% decrease in low birth weight births and a 4% decrease in postneonatal mortality. If all states in 2014 had increased their minimum wages by 1 dollar, there would likely have been 2790 fewer low birth weight births and 518 fewer postneonatal deaths for the year (p. 1514).[footnoteRef:3] [3: Kelli A. Komro et al., "The Effect of an Increased Minimum Wage on Infant Mortality and Birth Weight," American Journal of Public Health 106, no. 8 (2016): 514, doi:10.2105/ajph.2016.303268]

Aside from increasing the health of newborns, a higher minimum wage can also improve poverty markers for the most affected population, single mothers. Since 2009, the federal minimum wage has not increased. If it does, it may lessen "earnings poverty for single mothers, who are disproportionately represented among minimum wage workers. The Congressional Budget Office (2014) estimated that a $10.10 per hour wage would raise earnings for 16.5 million workers and reduce poverty by about 900,000" (p. 241).[footnoteRef:4] This means while employment may decrease by 0.3%, the quality of life for millions will increase. [4: Sandra K. Danziger et al., "INCREASING WORK OPPORTUNITIES AND REDUCING POVERTY TWO DECADES AFTER WELFARE REFORM," Journal of Policy Analysis and Management 35, no. 1 (2015): 241, doi:10.1002/pam.21884.]

Overall, the benefits are several as it relates to research on higher minimum wage. Policies thus far have only made small changes that have led to minor progress in a few states. Most notably of those states in California, one of the first to adopt a living wage policy of $15 per hour. Yet with the last change in minimum wage on the federal level happening in 2009, much is left to be done concerning public policy changes. Public policy must shift towards identifying the potential outcomes of changing the national minimum wage.

Problem Statement and Significance of the Study

The findings of this study will be able to provide clarity in regards to public policy on minimum wage in the United States. By addressing the concerns of organizations advocating for higher national minimum wage and examining opposition for such an increase, the study hopes to demonstrate the need for a higher minimum wage and the steps taken to slow or quicken the process towards that goal. Several articles note that benefits of increasing the minimum wage in the form of 'performance pay' or 'living wage' and are used as evidence by advocates of a higher minimum wage to move towards changing policy at the federal, state, and local level. "...performance pay is associated with increased productivity only when it is coupled with a high-wage policy. This holds for individual-based performance pay, group-based performance pay, and profit sharing" (p. 507).[footnoteRef:5] [5: Uwe Jirjahn, "Performance Pay and Productivity: A Note on the Moderating Role of a High-wage Policy," Managerial and Decision Economics 37, no. 7 (2016): 507, doi:10.1002/mde.2786. ]

This leads to the significance of the study. The significance of the study is to discover the efforts of the public through organizations that advocate for higher national minimum wage to offer an outline of the progress made and the objectives drawn towards public policy in that area. Progress has been made in states like California with potential change coming to cities like New York City and Seattle. This shows changes on the local and state level. However, there has been no progress made on the federal level towards a higher national minimum wage.

Perhaps this study will deliver the information needed to continue research on what may be halting progress of such change in policy on the federal level. As it currently stands, the national minimum wage does not match which the expenses of everyday life for most Americans. This means the poor are more severely poor than previous decades. "In 2000, the income of the average poor family fell $7,732 short of the poverty line, and by 2012, the poverty hap or 'income deficit' of families in poverty had risen to $9,785" (p. 9).[footnoteRef:6] [6: Edward Cary Royce, Poverty and Power: The Problem of Structural Inequality (2015), p. 9.]

Parameters of the Study

The primary concern of this research is to examine the current efforts of the American government towards adopting a higher national minimum wage. In attempting to examine factors that may account for progression towards the goal of a higher national minimum wage, thus study raises three interrelated questions. These questions are:

1. What opposition does the United States government face in relation to adopting public policy for a higher minimum wage?

2. Will a higher minimum wage help those in poverty?

3. What have been the effects of adopting a higher national minimum wage in other countries?

The focus of this study will be answering these questions through literature and the information given by organizations advocating for higher national minimum wage policies. The aim is to provide a better understanding of what kinds of changes the public wants in relation to the national minimum wage, what forces may be slowing or hastening the progress, and what is being done in the government currently. Some countries have already adopted a higher minimum wage like Germany, making it the first time they adopt a minimum wage. The changes have been met positively thus far with the country experiencing economic stability and growth.[footnoteRef:7] [7: Shanshan Liu, Thomas J. Hyclak, and Krishna Regmi, "Impact of the Minimum Wage on Youth Labor Markets," LABOUR 30, no. 1 (2015): xx, doi:10.1111/labr.12071.]

Literature points to a higher national minimum wage providing more advantages than disadvantages when it comes to businesses and the overall state of the economy. "...reduces voluntary labor turnover and reduces the incentives to shirk on the job and thus the number who are discharged, the number of separations will decline. A decrease in separations will also mean a lower number of job vacancies" (p. 18).[footnoteRef:8] The study will aim to highlight disadvantages of the current national minimum wage by providing the experiences of those looking to change public policy regarding the issue. Through analysis of theory and application of concepts, the qualitative study will aim to support the theoretical perspective of efficiency wage theory to help support the generation of public policy in support of a higher national minimum wage. [8: Liu, Hyclak, and Regmi, Impact" p.18.]

Research Design

The study is a qualitative research study. When taking the qualitative approach, and analyzing the data, the need arises to approach the information from a theoretical lens. "Theoretical lens or perspective in qualitative research provides an overall orienting lens that is used to study questions of gender, class, and race. This lens becomes an advocacy perspective that shapes the types of questions asked" (p. 249).[footnoteRef:9] Because the topic is public policy on minimum wage, information collected must be through literature and organizations advocating for higher minimum wage. This would fall into a phenomenological research design meant to allow the researcher to describe the "lived experiences of individuals about a phenomenon as described by participants. This description culminates in the essence of the experiences for several individuals who have all experienced the phenomenon" (p. 14).[footnoteRef:10] [9: John W. Creswell, Research Design: Qualitative, Quantitative, and Mixed Methods Approaches (Thousand Oaks, California: SAGE Publications, 2014), 249.] [10: Creswell, Research Design, 14.]

Minimum wage affects many Americans in the United States and thus can be a shared experience. Literature will help support or not, the information provided by individuals aiming to increase the national minimum wage. This serves as an exploration of the potential effects of higher minimum wage and what effect the existing minimum wage has on the public. The theory that will be used for the research design is efficiency-wage theory.

Efficiency-wage theory states "that such a constraint on firms is unnecessary in many cases because firms may be better off keeping wages above the equilibrium level. The novel insight of efficiency-wage theory is that paying high wages might be profitable because they might raise the efficiency of a firm's workers" (p. 632).[footnoteRef:11] Efficiency wage theory goes against what many resisting implementation of higher minimum wages state. They state that higher minimum wages will lead to removal of jobs by companies in order to save money or potential increases in outsourcing. However, the theory states this kind of action may lead to additional expenses and lowered productivity. [11: N. Gregory Mankiw, Principles of Economics (Mason, OH: South-Western Cengage Learning, 2009), p. 632.]

Companies like Google Inc. pay their employees better wages in order to reduce worker turnover rate and increase productivity within the company. Higher pay according to the theory, also may lead to better worker health that adds to higher levels of productivity. "The first and simplest type of efficiency-wage theory emphasizes the link between wages and worker health. Better paid workers eat a more nutritious diet, and workers who eat a better diet are healthier and more productive" (p. 632).[footnoteRef:12] If applied to the national minimum wage, higher minimum wage could lead to workers having more money to spend on nutritious food. This may lead to higher productivity nationally and less health problems. [12: Mankiw, Principles, p. 632.]