Soman, Kendrick Minimum Wage Current Event

Current Event

Minimum Wage Legislations

Current Events: Minimum Wage

Soman, Kendrick Minimum Wage Current Event

Introduction

The minimum wage has a century long history along with its proponents and vigorous opponents.

The minimum wage for workers was introduced by governments around the world in order to maintain a

decent standard of living, keep them away from poverty and to protect them from employers. To put it

bluntly it is an exercise by tax payers to prevent firms from getting something out of nothing. This paper

will analyze the it’s history, current legislations, future reforms underway and look at three scholarly

articles.

The minimum wage was first introduced in New Zealand in 1894 and it covered all businesses

and industries across the entire country. Australia was the second country to introduce minimum wage.

But in the case of Australia the wage was pegged to the industry and it also varied widely across its

provinces. Five years after introduction the Australian government introduced a single, unified legislation

to cover the minimum wage. In Europe, the United Kingdom was the first country to introduce minimum

wage in 1909.

In United States, the first state to introduce minimum wage is Massachusetts in 1912. Even

though covered only women and children it severed as an experimental ground and precursor to bigger

things. In America as a whole, the minimum wage was introduced as a part of Fair Labor Standards Act

(FLSA) in 1938 by then President FDR. The first standard set was $0.25 an hour which when adjusted to

inflation is $4.00 per hour at today’s rate. Among the other elements in the FLSA, some notable ones are

overtime pays and uniform standards for employment.

Even though United States has long history of minimum wage laws, the changes to it are far and

few between. Currently Australia has the highest minimum wage among the developed nations at $17.90

per hour. The Australian workers work a minimum of 38 hours a week and work for 48 weeks a year.

Taking into account direct and indirect financial benefits the Nordic countries lead the way in terms of

minimum wages. For example in Denmark the typical work week is 33 hours and work for 47 weeks out
Soman, Kendrick Minimum Wage Current Event

of a year. In terms of work week and year, an average US worker puts minimum of 40 hours a week and

50 weeks an hour. But unlike most of the developed nations the average US worker does not have any

added to benefits to his or her minimum wage job such as healthcare, pension, childcare etc. According to

Forbes magazine ranking list, when considered the direct and indirect financial benefits US ranks 14 th

among the developed nations.

The following are some of the features of minimum wage in US:

1. The minimum wage is not tied to the inflation, but increases rather in a linear form. It has been

increased 22 times since its inception in 1938.

2. President Carter a proponent of higher minimum wage, raised it four times, a near 50% increase

when compared to before he took the office.

3. Current Federal minimum wage is $7.25 per hour.

4. Twenty states have mandated laws which peg the state’s wages to federal minimums.

5. Twenty one states and Washington DC has minimum wage higher than the federal levels.

6. Five states do not have minimum wage laws.

7. Four states have minimum wage less than federal level and hence forced to carry out federal

levels.

8. Washington DC has the highest minimum wage at $10.50.

9. Individual cities are allowed to have their own minimum wage mandate. The highest minimum

wage among the cities is San Francisco at $15.00 an hour.

10. In 2012, 4% of the US workers were employed for minimum wage.

11. Average annual salary for single, full time, minimum wage US worker is $15,080 per year.

12. Majority of the minimum wage workers are made up of age group from 16 – 24, women and

minorities.
Soman, Kendrick Minimum Wage Current Event

Minimum wage has been a contested topic from the day of its inception. There has been an

unending war on both side of the aisle. Each time congress passed increase in minimum wage, it did so in

a very partition way. The congress is being lobbied heavily on both sides by businesses and unions for

their cause.

The arguments for minimum wage increase are:

 It will put money into the pockets of hard working Americans.

 It will reduce income inequality.

 It will not hurt job creation.

 It will unlikely to significantly impact prices.

 It will help to save government spending on welfare and food stamps.

 It will improve people’s economic security.

 It will lift people out of poverty.

 The business will benefit substantially.

 Children and the future will be more secure.

The arguments against minimum wage increase are:

 It would result in loss of jobs.

 It would hurt low skilled workers

 It would have little effect on reducing poverty

 It may result in higher prices for consumers.

 It will hurt small businesses and restaurants.

 Increased minimum wage will results in automation and outsourcing.

 In a global economy increase in minimum wage creates a huge gap among the trading partners

which will result in bigger trade deficit.

Soman, Kendrick Minimum Wage Current Event

Article 1: Ohio Minimum Wage to stay at $8.10

Source: The Plain Dealer

Summary

Ohio's minimum wage will remain at $8.10 in 2016, increased last year to index the inflation.

State Senator Kenny Yuko lobbies for his bill, which would raise Ohio's minimum wage to $10.10.

Similar bills around the country have been defeated or never came to vote. Congress is currently

working on a bill to raise the federal minimum wage to either $12.00 or $15.00.

Important Points

 In 2006 Ohio voters approved to index the inflation into minimum wage. Due to low inflation

in 2015 the minimum wage will remain at $8.10 for 2016.

 In Ohio 3.4 percent of hourly workers are paid at or below minimum wage compared to the

national average of 3.9 percent of hourly workers.

 Nearly 67 percent of the minimum wage employments are form service industry.

 Studies show that if the minimum wage in Ohio is increased by $2.00 an estimated 89,000

Ohioans would no longer need government assistance.

 The Employment Policies Institute in Washington D.C. Lobbies against increase minimum

wage on behalf of retail and restaurant industries. According to this organization if the

minimum in Ohio increased by $2.00, it will result in loss of 22,000 jobs.

Soman, Kendrick Minimum Wage Current Event

Article 2: It is time to raise the minimum wage

Source: Economic Policy Institute

Summary

The Economic Policy Institute outlines case for federal minimum wage increase for non- service

industry to $12.00 per hour. The paper outlines the exact content of the bill Raise the Wage Act

(RWA). The benefits of the wage increase and indexing the minimum wage to the inflation was

presented. An increase to $12.00 an hour is proposed and reasoning behind is detailed as well. It also

proposes fair minimum wage for retail industry.

Important Points

 RWA is proposed by Senator Patty Murray and Representative Robert C. Scott. Its aim is to

take long-overdue steps to address national crises of wage stagnation and income inequality.

 Raise of the Wage Act will increase minimum wage to $12.00 by 2020. Sets automatic

increases starting 2021 to keep pace with rising wages overall. Proposes to gradually phase

out the subminimum wage for tipped workers.

 This bill will affect 35 million workers, roughly one fourth of the workforce. The impact will

be felt greater among women, Hispanics and African Americans.

 Raising wages to $12.00 an hour has several advantages such as benefits the workers, Main

street businesses; it is economically sustainable and is in line with past federal minimum

wage increases in terms of percentage.

 Eliminating the subminimum wage will reduce poverty, particularly for women workers.

Low-wage workers, like all workers, deserve an incremental and predictable raise each year,

so they don't fall further and further behind.

Soman, Kendrick Minimum Wage Current Event

Article 3: Minimum wage and unemployment

Source: Australian Broadcasting Corporation

Summary

Australia has the highest minimum wage in the world. The new Australian government is

reviewing the minimum wage and looking to lower it. Opposition leader Bill Shorten has been

pushing against lowering the minimum wage. He argues that evidence from Europe shows the lower

minimum wage doesn't contribute to unemployment levels. Research shows that in fact Mr. Shorten's

claim is backed up by data.

Important Points

 Australia has highest minimum wage in the world and the current Abbott Government is

looking to lower it. The main reason for this is the higher unemployment rates.

 Mr. Bill Shorten gives evidence from Europe to show the fact that unemployment rate and

minimum wage are more or less independent factors and do not have effect on each other.

 Data and research from UK and US shows there might a very slim correlation between them,

but have concluded that they are independent factors.

 Organization of Economic Cooperation and Development has gathered data from 34

countries and concluded that minimum wage set at reasonable or moderate level will not

affect the unemployment rate.

 Australia’s of minimum wage workers are predominantly youths under age 25. In the case of

youths under 25 there seems to be bigger impact on the unemployment levels.

Soman, Kendrick Minimum Wage Current Event

Conclusion:

There have been arguments for and against the minimum wage ever since its inception. It has

been proven time and again from several experimental events at city, state and country levels, that having

a reasonably dictated minimum wage helps workers, community, business and country as a whole.

Minimum wage increase in cities such as San Francisco, Seattle, and Washington D.C. has proven to be

boom to the community. If the poverty level has not been lowered all the minimum wage workers will be

well below it. Unlike other countries the minimum wage workers in US does not receive any additional

benefits.

Considering all the facts the only conclusion that can be derived is that the wages has to be raised

to reasonable level. It is important to have a federal level minimum wage requirement, but it is not

enough. The wages has to be dictated based on the state or the city. It is very unreasonable to expect the

minimum wages for workers in Toledo should be raised to match the minimum wages in San Francisco.

But it should be based on locale and the needs of the population. Our current state minimum of $8.10 is

not sufficient for a family in Toledo. In this case several aspects such as rent, transportation, access to

healthcare, medical services, education etc. has to be taken in to consideration before the wage is decided.

So the minimum wage argument has be addressed bottom up instead of top down model that is currently

used.
Soman, Kendrick Minimum Wage Current Event

References

Cleveland Plain Dealer. (2016) Ohio minimum wage to stay at $8.10. Retrieved from

http://www.cleveland.com/business/index.ssf/2015/09/ohios_minimum_wage_unchanged_a.html

Economic Policy Institute. (2015) It’s time to raise minimum wage. Retrieved from

http://www.epi.org/publication/its-time-to-raise-the-minimum-wage/

Australia Broadcasting Corporation. (2015) Minimum wage Vs Unemployment. Retrieved from

http://www.abc.net.au/news/2015-03-12/minimum-wage/6290482