Poverty has been attributed to low income, low wages and unemployment. The provision of a wage by the current federal law has been pinpointed as a means of control in order to reduce the working poverty level. However, the question of whether raising the federal minimum wage will work at improving the current population poverty rate is still an impending topic in the United States. Productivity in an individual firm is determined by the available work force. The raising federal minimum wage has adverse effects on the businesses and the country’s economy. State policies to increase the payroll subsidy resulting in higher rates of minimum wages offers no evolution of the labor landscape in which minimum wage workers operate.
Increase in minimum wages offers no solution to the problem of poverty. The persons earning the minimum wage are a very small share of workers most of them comprising of teenagers. According to Harris et al. (2014) the shrinking share of low-wage workers in 2001 comprised of teenagers earning no more than the federal minimum wage of $7.25 while others earning less than $10 an hour, only 12 percent. This is a significant raise to the number that existed in the previous century. Latest research centered on data for neighboring counties across government lines have overlooked the current labor-labor substitution thus faultily resolved that raised minimum wages do not unfavorably shake the current employment rates (Dorn).The compliance to the raise in minimal wage will offer no overall impact on the country‘s economy or the existing poverty rate. According to Dorn, personnel who maintain their occupations are much better off but only at the cost of untrained, typically young, employees who either lose their stations or can’t find another employment opportunity at the legal minimum. Furthermore, at hand will be a decline in the quality demand for the low skilled workers. Work as a commercial exercise involves personnel working on diverse levels. According to Dorn, managers have a tough incentive to maintain the better-educated teens and train them, and to hire expert laborers to drive labor-saving equipment. The capacity to offer unvarying remuneration to all personnel will lower the efficiency rate and hinder the efforts of the co-workers to increase the effort used in the job.
The increase of minimum wage would increase the current unemployment rate. The government requires that certain workers get paid higher wages, and then businesses make adjustment to encompass the added cost such as reducing hiring, cutting employee hours, reducing benefits and charging higher product price (Wilson). The massive layoffs results in a number of different workers looking out for other employment opportunities. The current unemployment rate stands at less than 18%. However, the companies may choose to adopt younger staff in order to manage the increase in the minimum wage. The exploitation of the teenagers will be present scenery in numerous shops and business. With the hiring of younger staff, the more permanent minimal wage workers will be laid off thus increasing the unemployment rate. With the hiring of younger employees, companies can cut welfares and hours, and they can replace more-skilled workers for the under skilled workers (Dorn 2014).The employment of more young teenage workers will result in an increase in high school dropout rates inducing a vicious cycle of people reliant entirely on minimal wage. Additionally, the firms have more litheness in the long run and will find ways to cut back on the higher-priced lab innovations such as integrating innovative equipment as a means of establishing labor-saving capital venture, and trained workers will tend to substitute unskilled employees (Dorn).
The effects of any potential percentage increase will lead to the death of the small and medium businesses. The small business employers are also required to raise the wages of their employees. Most of the small businesses operate on a shoe string budget which includes a minimal working capital. Imposition of the legislative laws requiring them to raise workers wages may have a straining effect on the business. According to Perman, small businesses are sensitive to policy changes because they suffer a lot of economic pressure. The policy changes cause most of the owners to examine strategies of staying in business. Most of the time, the choice to laying off the workers or increase of product rates. However, price changes are a sure way to kill the business thus the choices left is laying off workers. For small businesses that adopt the wage increase, there is a reduced turnover with most of the excess money being absorbed into local economies.
The increase of the funding in the present economic state will result in damaging effects. The current trend in policy making across all countries and states is that policy planning is guaranteed to generate faster economic growth that consequently leads to the rising of wages and thus better opportunities for all workers. The economic models used to understand minimum wage laws indicate negative effects on the economy. According to Harris and Kearney, an estimated 2.6 percent of personnel are waged accurately the minimum wage, however, 29.4 out of each hundred workers are remunerated wages that are below or equal to 150 percent of the minimum wage in their government. In addition, the hours worked by this group represent nearly one-quarter 24.7 percent of hours operated, which shows that a great portion of the affected parties is functioning close to full time hour. The current inflation rate has forced the companies to work on budget cuts in order to survive. Increased wages will cripple the companies which will, as a result, retaliate by increasing product prices as well as reduce worker numbers (The Impact of Increasing the Minimum Wage on Unemployment: No Evidence of Harm). The escalation in wage amounts increases the production budget in companies. If the prices are increased, consumers will buy fewer items for more money or reduce the amount of money to spend on other things. This would translate to fewer jobs (Dorn). Moreover, the increase of minimum wage will increase job queues as no individual is willing to work below the accepted wage pay .According to Dorn , the minimum wage slashes into returns, there will be a reduced amount of principal investment and occupation development will slow This will increase the competitive labor forces with companies competing to acquire laborers.
In conclusion, we have seen that one of the problems raised by the increase in wages is economic crippling. Infatuation will consequently increase leading to more people being over-reliant on government programs to feed its people. The unemployment rate wills double resulting for choice of inexpensive underage laborers as opposed to low skilled workers. The small businesses which provide employment may go bankrupt resulting from the increased financial budgets. Identifiably, the choice to increase the minimum wage does not result in the decrease of the poverty rate. Instead, it works to create more problems than solve. Thus, higher rates of minimum wages offer no evolution of the labor landscape in which minimum wage workers.
Dorn, James. "The Minimum Wage Delusion, And The Death Of Common Sense." Forbes, 2013. Web. 17 Feb 2014. <http://www.forbes.com/sites/jamesdorn/2013/05/07/the-minimum-wage-delusion-and-the-death-of-common-sense/>.
Harris, Benjamin and Melissa Kearney. "The “ Ripple Effect” of a Minimum Wage Increase on American Workers." The Brookings Institution, 2014. Web. 17 Feb 2014. <http://www.brookings.edu/blogs/up-front/posts/2014/01/10-ripple-effect-of-increasing-the-minimum-wage-kearney-harris>.
Perman, Stacy. "As Minimum Wages Rise, Businesses Grapple With Consequences." Nytimes.com, 2014. Web. 17 Feb 2014. <http://www.nytimes.com/2014/02/06/business/smallbusiness/as-minimum-wages-rise-businesses-grapple-with-the-consequences.html?_r=1>.
Unknown. "The Impact of Increasing the Minimum Wage on Unemployment: No Evidence of Harm." An Economic Sense, 2013. Web. 17 Feb 2014. <http://aneconomicsense.com/2013/03/06/the-impact-of-increasing-the-minimum-wage-on-unemployment-no-evidence-of-it/>.
Wilson, Mark. "The Negative Effects of Minimum Wage Laws." Cato Institute, 2012. Web. 17 Feb 2014. <http://www.cato.org/publications/policy-analysis/negative-effects-minimum-wage-laws>.