Federal Minimum wage on the economy
The Federal minimum wage is the least amount of money that the employers or the United States Government has to pay its’ employees. This wage has been agreed upon by the courts. It was put in place so that there could be a standard way of paying workers to eradicate exploitation by owners of businesses. The federal minimum wage in the U. S. A as per now is $ 6. 55 per hour but the Fair Minimum Wage of 2007 increased the minimum wage to $ 7. 25 per hour.
By increasing the minimum wage, the government seeks to improve the lives of the American citizens so that they can cope with the rising cost of living and more so they are entitled to it. o Impact on employment The federal minimum wage adjustments were formulated to keep poverty at minimal or eradicate it completely. Individuals who are already employed have and continue to enjoy better wages as it has made their lives bearable especially during this harsh economic time; but this can only be said for the moment as the long-term effects remain to be seen.
In the book, (Minimum wages p. 60), Katz and Krueger did a study on New Jersey stores and found out that an increase in the minimum wage raised employment; Stores that initially paid low wages showed significantly more employment growth between February and November in the year 2000 than did stores that paid higher starting wages. Several studies have been done on the United States to show the impact of the federal minimum wages on employment. It was found out that a percentage increase in the minimum wages on current basis will result in future decreases on employment by 1. 3% and if the minimum wage reduced by the same 1%, unemployment will increase by 1. 6%.
Therefore, we can say that increasing the federal minimum wage causes higher unemployment rates and those who are mostly affected are the youth, low skilled laborers and the minority. Moreover, Employers respond to minimum wages by shortening the workweeks or cutting back on store hours of the lowest-paid employees so as to meet their set targets and objectives and this will not make their situation any better. o Family and household income
The federal minimum wage accounts for about 60% of an average family of four‘s income. In urban areas this minimum wage is not enough to meet the high costs of transportation, housing among other things that have been affected by the decline of the economy and inflation. “The rise in the federal minimum wages is only seen to benefit the few who are more privileged than the rest who basically depend on it (mastriana, 2007). ” Those people who are well off have other businesses on the side that bring in the extra cash they need but most of the less privileged have to solely depend on the government for survival.
Moreover, if the household’s income of the less privileged increases due to an increase in the minimum wage, it will significantly improve their lives as the bills to pay and things to buy will reflect the general increase in prices in the economy. The minimum wages are supposed to stay stable because in so doing, they will secure peoples jobs and people parents will not worry on how they will provide the basic needs for their families or how they will save up for college funds for their children.