Essay on Raising Minimum Wage: Economic Impact on Business Owners

Introduction

The plan to set the federal minimum wage at 15 dollars per hour is an aggressive one and would result in higher pay for at least 17 million workers and as many as 27 million on the upper side by 2025. That would cause a significant transfer of income from largely high-income earners to impoverished Americans. But this would come at the expense of business owners. As the report outlines, this would cause a significant shrinkage in the economy, pushing some people out of work. While the median stood at 1.3, the report highlights that as high as 3.7 million people might be rendered jobless (Tankersley & Cochrane, 2019). According to the advocates of the bill, any losses in jobs would be overshadowed by the millions who would earn higher wages besides the millions who will be lifted out of poverty.

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Primary Economic Elements

There are two primary economic elements in play here: higher wages and job losses. These are the two primary economic elements. Besides, the two seem to be directly proportional in their interplay. According to the article, the move to raise the minimum wage to 15 dollars per hour by 2025 would positively affect about 17 million workers across America. The move may affect as many as 27 million workers. Consequently, the move would lift about 1.3 million people out of poverty. This raise in the federal minimum wage would amount to a significant transfer of income to impoverished Americans, a move that the Congressional Budget Office termed as "unprecedented in recent history. Higher in the wage distribution than it has been at any time since 1973." Job loss is the other primary economic element in play. The bill would lead to a loss of about 1.3 million jobs (Tankersley & Cochrane, 2019). The rise on the income, on the one hand, would come at the expense of high-earning Americans and the business owners. Due to the increased labor costs, business owners would experience lower profits and would almost certainly reduce their wage bill. Compounded by the reduced spending by the high-earning Americans, business owners would reduce their staff, thereby pushing some people out of work. However, it is uncertain for how long these people would go without jobs. According to the article, some people would go for many weeks without a job. With as many as 3.7 million people expected to lose their jobs, the effect of the bill would be significant in terms of job loss.

Graphical Analysis

The figure above demonstrates the relationship between higher wages and job loss in the American market if the proposed legislation is to be implemented by 2025. By raising the minimum wage, a lot of workers will have higher earnings. About 1.3 of these workers will move above the poverty line. However, the increase would lead to a directly proportional increase in the size of the job losses. That is, as the wages increase, more job losses are occurring. However, the job losses are overshadowed by laborers lifted out of poverty as well as the millions who would get higher wages.

Conclusions

The overall conclusion of the article is that the raise of the federal minimum wage would be beneficial to American society. While there is some significant amount of people who would lose their jobs, there is a huge volume of laborers who would get higher wages. Also, many of the workers would move above the poverty line. Hence, as a group, low-wage laborers would be unambiguously well off. According to the article, the bottom line is that the benefits exceed the cost, making this an important and viable move. America has been grappling with a serious disparity in wage gap with many people earning very little while a few earn a lot. The bill would cause a significant redistribution of wealth from the rich to the poor. Because there is a vast amount of Americans who earn very low and are impoverished, the rise in their income would be good for the American society that has one of the largest income inequalities across the world.

Part B

Interviews by My Uncle and My Cousin

I first interviewed my uncle after giving him the article and my analysis. He understood the article very well. Because he operates a small business with several employees, he was concerned by the fact that he will have to raise their wages to comply with the federal law if the bill is passed. He found the topic very interesting and understood and liked my analysis very well. In particular, he was quick to pick up that wage increment would be accompanied by job losses across the entire economy. He argued that for the last several years, the economy has not expanded to increase the number of jobs available. As a result, he argued that the net effect would be felt more in terms of wealth redistribution because the money would flow from the rich to the poor. However, he was concerned with the job losses and argued that it is the poor who would face the most job losses because often they are the ones who offer the unskilled labor that most employers find easy to do without.

My cousin was also interested in my article and my analysis because he is looking for a job. He understood my article and my analysis because he pointed out to me that at a time when he is looking for a job, he does not want to hear that job losses are coming. He was quick to point out to me that firms would not be hiring if they are already in the process of reducing their labor force. He argued that finding an entry-level vacancy in such a market would be difficult for him.

Reference

Tankersley, J., & Cochrane, E. (2019, July 8). $15 Minimum Wage Would Reduce Poverty but Cost Jobs, Congress Told in Report. The New York Times. Retrieved from https://www.nytimes.com/2019/07/08/us/politics/federal-minimum-wage.html