Research Paper on Evolution of Minimum Wage

Introduction

The current controversy over minimum wage dates back to the initial wage legislation of the Labor Standards Act of 1938. By this time, the United States government had already set a federal minimum wage. However, the legislation passed at that time had no specific formula for setting the wage level for all or future wage adjustment mechanism (Luce, 2017). This, therefore, meant that any adjustment on federal minimum wage could only be done by an Act of the US Congress. Despite several adjustments in minimum wage over the years, the topic is still a red-button for most politicians and economists and any amendments that come before the U.S Congress is immediately politicized; advocates arguing that it protects individuals at the lowest rung of economic ladder and others claiming that a fixed minimum wage actually affects the same group (Meer & West, 2015). Hence, without strong persuasion and efforts from social movements and various trade unions, an increment in the minimum wage would be a matter of good luck. For instance, in the early 1990s, the advocates of the minimum wage completely failed to pressure the US Congress to raise the federal minimum wage which was at this time far below the federal poverty line. This led to several organized campaigns on living wages by several trade unions and community organizations which later gave birth to even larger movements ((Luce, 2017). The purpose of this paper is to analyze the evolution of minimum wage and its effects on teenage unemployment.

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Recent wage evolution can be attributed to the success of living wage campaign that began in Baltimore, 1994. Initially, after the federal minimum wage, states were allowed to set their own minimum wage and the authority to allow their cities to initiate their own minimum wage regulation. However, by 1990s, different methodologies set to define what an individual needs to earn to cover basic needs failed terribly and the result was a huge gap between the minimum between the federal minimum wage and the poverty line (Rinawi & Backes-Gellner, 2015). This led to multiple campaign movements. After the success in Baltimore which set the minimum wage at $7.25 an hour, several national wage movements sprung across the country (Luce, 2017). Coalitions were formed in different states and cities around the United States demanding wage ordinances. The ordinances demanded that most cities' contracts come with an increased wage for employees; including subsidies for firms and holding service contracts. The campaign was seen as a success in over 120 cities and counties until the 2008 economic crisis which brought wage advances to a halt (Rinawi & Backes-Gellner, 2015). For several years after the crisis, little advances on wage ordinances were made and even the ruling government could not hold on to their initial promise of wage increment. The Democrats were completely against wage increment and could not allow any advances on wage within the New York City which had the same minimum wage as the federal at $7.25 per hour. By 2011, several issues of inequality and low wages emerged which led to several strikes among retail workers demanding an increase in the minimum wage to $15 an hour (Milkman & Luce, 2016). This quickly spread across other parts of the country since the low wages were not a problem in New York alone. By 2016, the solidarity actions and protests of over 350 cities involved in the strikes gained an international momentum in support of the domestic wage increment. Despite not covering a large share of low-wage workers, the campaigns helped unionize some low-level workers and build stronger coalitions to raise wages to $15 per hour.

Even today, the debate over the minimum wage is still as sensitive as it was before to politicians and economists. Advocates and opponents are often ready to win over the working class citizens whenever an amendment is brought to the Congress. According to (Neumark & Wascher, 2015), advocates of minimum wage believe that most workers, especially those that belong to the marginalized groups do not have a stronger bargaining power when it comes to the debate over the minimum wage. They need constant interventions from the government to help them fight for the minimum living wage. Statistically, advocates of minimum wage argue that the current minimum wage falls way below the non-supervisory worker's wage. Similarly, they believe that most employees with good living wages can comfortably cover their cost of living which in turn boosts their morale in terms of productivity. Minimum wage also eliminates income inequality among employees and thereby giving employees incentive to work (Parker, 2017). This, for instance, is crucial for young adults who spend more than they actually earn. Economic growth in any country is oftentimes attributed to per capita income and citizens' expenditure. This implies that minimum wage can easily spur economic growth and development in a country. Moreover, to young adults, minimum wage ensures funds to invest in their education and hence, their future productivity in terms of innovations. Finally, minimum wages reduce turnovers and expensive training costs for business due to the shifting of jobs by employees.

Unlike the advocates for minimum wage, opponents believe that the real value of any employee should be determined in the open market and not through a government-imposed value (Meer & West, 2015). They argue that a fixed minimum wage proposed to protect marginal workers actually hurts them more. For instance, if a school going teenager applies for a factory job, his/her overall output compared to more experienced employees will be relatively less; therefore, his pay according to the factory management will be less. In this kind of a scenario, the opponents of minimum wage argue that if the factory management is forced under the minimum wage legislation to pay the young adult a high minimum wage, then the company would simply not higher the minor. In this case, the teenager will be unemployed and with zero experience or income. Ideally, the impact of minimum wage is more experience by the disadvantaged group of workers (Neumark & Wascher, 2015). If the federal minimum wage is increased, the adverse impact will be felt mostly by the inexperienced and the unskilled teenage population. Opponents of minimum wage argue that it is not only the minimum wage that affects the employment opportunities for young adults; the minimum wage coverage would also increase the unemployment among teenagers (Parker, 2017). Ultimately, companies and employers will weigh between the federal minimum wage and the wage they are obligated to pay their more experienced and productive employees. As a result, to companies and employers, the more the federal minimum wage relative to the wages of more experienced workers, the fewer unskilled teenagers they would want to employ.

Conclusion

Over the years, there has been a constant increase in debates over the minimum wage. Proponents and opponents of the minimum wage have come up with different studies and theories trying to outdo one another but a conclusive outcome is yet to be found. Despite recent studies that minimum wage improves the lives of individuals in the United States; the pros only outweigh the cons up to a given level. In passing minimum wage laws, the US Congress has to find equilibrium between improving workers' living wage and protecting the unskilled workforce.

References

Luce, S. (2017). Living wages: a US perspective. Employee Relations, 39(6), 863-874.

Milkman, R., & Luce, S. (2016). State of the unions: a profile of organized labor in New York City, New York State and the United States. working paper, The Joseph S. Murphy Institute for Worker Education and Labor Studies, City University of New York, New York, NY.

Neumark, D., & Wascher, W. (2015). The effects of minimum wages on employment. FRBSF Economic Letter, 2015, 37.

Meer, J., & West, J. (2015). Effects of the minimum wage on employment dynamics. Journal of Human Resources.

Rinawi, M., & Backes-Gellner, U. (2015). Occupational Skills and the Evolution of Wages.

Parker, R. (2017). The Impact of Increasing Minimum Wage.