Question

Read article on the minimum wage:

To complete this activity:

1. Prepare a response to the following discussion prompts, based on the article: Help the Working Poor, but Share the Burden.(see attached)

(a) Discuss the costs and the benefits associated with increasing the minimum wage.

(b) If you were are congressional member and had to vote on an increase in the minimum wage to say $10 per hour would you? Why or why not?

Help the Working Poor, but Share the Burden By N. GREGORY MANKIW In a speech last month, President Obama brought renewed attention to economic disparities in the United States. The gap between rich and poor is indeed substantial-much larger than in most developed nations and much larger than it was 40 years ago. So what is the best way to help those struggling at the bottom of the economic ladder? If we could figure out a way to do it, the most effective solution would be to increase the skills of those low-wage workers. Many studies have shown that the financial return of education is now high by historical standards. Reforming the education system so that more students graduate from high school and college is thus crucial to a more egalitarian prosperity. But upgrading the skills of the labor force is a decades-long project, not a quick fix. And educational reform is easier said than done. As a result, those who are worried about inequality look for more immediate ways to help workers with limited skills. Before turning to President Obama's proposal, let's consider two other possibilities. For lack of better terms, call them Plan A and Plan B PLAN A The government subsidizes the incomes of low-wage workers. These subsidies are financed by increasing taxes on middle- and upper-income Americans PLAN B The government again subsidizes the incomes of low-wage workers. But under this plan, the subsidies are financed by taxing those companies that hire low-wage workers.

Answer 1

Introduction:-

The United States is indeed one of the most developed countries across the world with its currency used as the major tool for all transactions that take place between the worlds. The country is at the center of all economic development and innovation and it isn't wrong to say that the world as we know today, is built on the key innovations of the United States.

A major result has been that income levels have risen of the country previously. But in the modern era, with rapid globalization and the fact that cheaper labor is available abroad mostly in Asian countries such as India and China, the United States has rapidly begun to see lesser jobs and a decline in overall profits.

The gap between the rich and the poor is widely expanding and is the result of the fact, that the rich will always earn even if the production goes abroad since their product also gets sold across the globe. On the other hand, with globalization most effected are the low wage earners who are getting replaced by global competition and people who are ready to work for half the price owing to currency differences and expenses.

As a result the hot topic is to increase education standards which can be done by providing government subsidies in one form or the other.

In detail the following will explain its consequences.

(a) Discuss the costs and the benefits associated with increasing the minimum wage.

The benefits of increasing the minimum wages is that jobs start paying people more salaries than they previously were hence, resulting in higher net disposable income among the working population of a country.

This is highly reflected in the most vulnerable sections of the society since they get affected the most while most others already earn higher than the existent rate.

It ensures that they have proper access to modern facilities such as nutrition, healthcare and infrastructure as long as they spend their money wisely, and is a vital tool to increasing overall economic and social stability of a nation.

That said, an increase in the minimum wages must be justified since increasing taxes may often result in downsides which are more seen in the long run. The government has two ways to source this increase either through more tax collection or to alternatively reduce spending in other areas and spend towards increasing the minimum wages. Also minimum wages increase might result in a situation in which companies stop hiring low skilled employees since these are easily available globally turning them even vulnerable.

(b) If you were are congressional member and had to vote on an increase in the minimum wage to say $10 per hour would you? Why or why not?

The current prevailing rate in the United States is about 7.25$ an hour. The problem is not about the minimum wages, I’d say but rather about the availability of employment in the nation which is a bigger problem.

This can only be done by increasing the level of education the answer to which is not increased spending on minimum wages but rather on increasing the technological and educational qualification of the people of the country.

The rise from 7.35 to 10$ an hour would be seen as a negative increase, and companies might stop employing American low skilled employers at all because of increased costs. The social changes will be reflective only if these people found jobs at the first place.

An increase in cost say for a company of over 30% for low skilled employees at one point of time would be extremely negative, and could result in Asian countries such as India and China who readily agree to get paid half or even lesser of existing minimum wages.

The idea here should be at ensuring that low skilled employees get formal access to education if not already and that their competencies should be increased up and beyond being low skilled. Thus any expenditure that the government needs to spend at this time is at bringing the social change as described, than increasing minimum wages which could lead to bigger issues and problems.

Please feel free to ask your doubts in the comments section