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Exploratory Essay: Is The Minimum Wage High Enough
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If you have ever worked for minimum wage, I am sure you have felt as if your time was worthless. After taxes you brought home next to nothing, no matter how often you worked. Thatâ€™s at least how I felt when I worked for minimum wage. In high school I had nothing to pay for but a cell phone. I worked for minimum wage and it seemed like I barely could afford it. I had basically no bills and I worked around twenty hours a week, and it seemed like I couldnâ€™t save any money. I always wondered how my coworkers, who were adults, who had real things to pay for pulled it off. After reading Barbara Ehrenrechâ€™s Nickel and Dimed it really made me wonder if the current minimum wage is really high enough.
First, I wanted to find out what minimum wage is. According to Google minimum wage is defined as, â€œA wage below which employers may not legally pay employees for specific kinds of employment.â€ Next I wanted to know how the wage was calculated, So I searched and found a page on the International Labor Organizationâ€™s page that listed the six criteria for setting the minimum wage. Criterion 1: the needs of workers and their families; Criterion 2: the general level of wages in the country; Criterion 3: the cost of living and changes therein; Criterion 4: social security benefits; Criterion 5: the relative living standards of other social groups; and Criterion 6: economic factors, including the requirements of economic development, levels of productivity and the level of employment.
Now, I had heard of something called a living wage before and I was curious if it differed from the minimum wage and if so how. I learned the living wage is different and it is defined as: â€œAt an absolute minimum, a living wage is the amount a person would need to earn to stay above the federal poverty level.â€ Then I became interested in whether or not the current minimum wage was high enough to be considered the living wage. Unfortunately the minimum wage is only $5.15/ hour while, â€œThe living wage In 2000, amounted to $17,050 a year for a family of four, or $8.20 per hour for a full-time, year round worker.â€ Obviously the minimum wage is not high enough to be considered the living wage. Which led me to believe that someone could not live off of the current minimum wage. This didnâ€™t make sense to me because according to the International Labor Organization one of the criteria for minimum wage calculation is the cost of living.
This made me wonder why minimum wage jobs exist? And what kinds of people are taking these jobs. Well, when I hear the phrase minimum wage job the first occupation that pops into my mind is working at a fast food restaurant flipping burgers. That doesnâ€™t seem like an intellectually involved job. And when you look at a typical minimum wage job setting such as a fast food restaurant you typically see high school students, high school dropouts, and mentally challenged people filling these job slots. The common theme would have to be a lack of education. And just because someone is uneducated does not mean they do not need money to support oneâ€™s self or oneâ€™s family.
I then went back to thinking about how the minimum wage is substantially lower than the living wage. The first solution that popped into my head was; Why not raise the minimum wage to something near the current living wage? Would that help out? It sounded like a simple solution to a simple problem. If the minimum wage is too low, then why not just raise it? According to the Economic Policy Institute analysis of current Population Survey Outgoing Rotation Group, â€œIf the federal minimum wage were raised to $7.00, as proposed in the fair minimum wage act of 2004 the bottom 40% of households by wages and salaries would receive nearly 60% of the benefits despite the fact that they earn only 15.8% of earnings.â€ Well, if that were true then it would be safe to assume that those who live on minimum wage now would greatly benefit from a raise.
I then thought that maybe I should consider how raising the minimum wage would affect others. I wanted to know what would happen to the families who are now above the poverty line. Would moving the low-income standard up also bring the standard for the middle class down? Would we just be including more of the middle class into the lower class? The Economic Policy Institute also stated â€œFor those above 200% of the poverty line, the earnings of low-wage workers are essential to their incomes and therefore their standard of living. In fact, 1.4 million families with incomes hovering above 200% of poverty would drop below that line if it werenâ€™t for the earnings of those families low-wage workers. For such families, though not impoverished now, the minimum wage is important for keeping them in the middle class.â€ I thought that was a valid point, after all if the middle class makes a given amount of money then why wouldnâ€™t bringing the lower classâ€™s income nearer to that cause more of the middle class to enter the lower class? But, are we sure it would work that way? Could it instead bring more families into the middle class instead of bringing more of the middle class into the lower class?
I then began to wonder if raising minimum wage would increase the rate of inflation. It seemed like a plausible outcome seeing as how it would be like giving everyone a raise, which would in turn devalue the dollar. Thus putting us right back to where we started. My older sister Elizabeth brought up a good point about how most places that have low wage employees would have to raise prices on their commodities to make up for the increasing labor charges. Places like grocery stores and restaurants would feel this probably the most since the majority of their employees are paid minimum wage. Thus affecting all of us since we all have to eat. However, I researched this topic to see if my sister was on to something and found that â€œAn Oregon center for Public Policy Study of the impact of the 1997 and 1998 minimum wage increases on the Oregon restaurant industry found that inflation of restaurant meal prices matched general price increases in the rest of the economy and was less than general food and beverage price inflation.â€ That study would suggest that it wouldnâ€™t cause inflation at all. This made me wonder if there were studies out there that would say otherwise. I looked extensively to see if there was a study somewhere that would tell how raising the minimum wage would cause any amount of inflation, and found the common theme was that if the minimum wage was raised enough to make a difference, there wouldnâ€™t be a negligible rise in inflation.
While thinking about inflation I started to wonder about how minimum wage has been in relation to the current value of the dollar. In other words: throughout the history of the minimum wage when was it actually worth the most? I found that, â€œThe inflation-adjusted value of the minimum wage is 26% lower in 2004 than it was in 1979.â€ So all this time there has been fear that raising the minimum wage will cause inflation, in reality it hasnâ€™t even been keeping up with it. And we are paying these people relatively less and less as the years go by without making any adjustments. This made me wonder what else was economically different among 1979 and 2004. One thing that I found that was interesting was that, â€œback in 1979 the average income of the top 1% was 133 times that of the bottom 20%; by 2000 the income of the top 1% had risen to 189 times that of the bottom fifth.â€(www.economist.com) While it could be somewhat unrelated it appears that in 79â€™ the minimum wage was worth more, and there wasnâ€™t as large of a distance between the rich and the poor. Where now it seems that minimum wage is lower and there is a much larger distance between the upper class and the lower class. I thought these figures were more than a coincedence, and that because the minimum wage employees were working for 26% more than they are now that it would make sense that distance between classes was closer back then.
When I worked for minimum wage I believed strongly that I deserved a raise and that the minimum wage was entirely too low. However now that I make more than minimum I found myself not wanting the minimum wage to increase because in some weird way I thought it was distancing me from being in the lower class. Right now I feel that raising the minimum wage would be beneficial. Not just to the lower class but to our entire economy. And thatâ€™s where I stand on the issue right now.
â€œFrequently asked Questions about the Living Wage.â€Retrieved on December 11,2005. http://www.responsiblewealth.org/living_wage/qanda.html
Chapman, Jeff. â€œThe Who and Why of the Minimum Wage.â€ August 6, 2004. http://www.epinet.org/content.cfm/issuebrief201
â€œFrequently asked Questions.â€ (updated December 2005) retrieved December 10. http://www.epi.org/content.cfm/issueguides_minwage_minwagefaq
â€œEver Higher Society, Ever Harder to Ascend,â€ (December 29, 2004) retrieved on December 10. http://www.economist.com/world/na/displayStory.cfm?story_id=3518560
â€œMinimum Wage Laws in the States