Project #158654 - Economics Discussion for Response

Business Tutors

Subject Business
Due By (Pacific Time) 12/04/2016 11:30 pm

Discussion response/reply to 2 original post. 1/2 page per topic....APA format. Maximum of 1 page.  

In responding to the discussions and to other students, please be sure to use the course material using in-text citations and a reference list to cite the source(s) used. 

(1) Discussion Post for Response to (KG)

The current U.S. Federal minimum wage rate is $7.25 an hour, which itself it rather low, especially when comparing it to the 1968 wage rate (about $10 in current prices). While the idea of increasing the minimum wage, rate is attractive for employees, as the article in The Economist states, it has been difficult to truly grasp how (and by how much) does an increase in minimum wage rate really affect a country. Citing Neumark's paper, the article notes that most studies agree that an increase of 10% in the minimum wage rate usually causes an increase in unemployment by 2% for workers who are affected by the minimum wage rate (usually young and low-skilled workers). The Congressional Budget Office in 2013 also studied labor data and estimated that a $10.10 minimum wage would reduce total employment by 500,000 jobs while increasing earnings for low-wage workers by $31 billion. The Economist article goes on to note that only 12.7% of minimum wage earners were in poor households, while almost 45% lived in households with incomes three times the poverty line (presumably earned by teenagers or secondary workers). Hence, an increase in minimum wage might not help poor households in a significant manner as only 12.7% of households will be really affected. Conversely, an increase in minimum wage rate does show an increase in productivity (it is unsure if due to higher worker motivation or employers compelled to increase efficiency due to higher cost). The US News article also cited studies which gave similar results theorizing that a binding minimum wage increase could make employers less interested in increasing employment opportunities. However, overall, increase in wages could lead to increase in demand of goods and services as incomes of households in the lower income thresholds increase. But an increase in income in poorer households will be mirrored by decline in income in the annual income of the richest. Hence, the increase in demand of goods and services also remains under question. A higher minimum wage does not seem to have a positive macroeconomic effect in the economy and the costs might ultimately weigh down the benefits. At the same time, in an economy with declining male workforce participation rate, higher wages might lead to more unemployment for that sector. Even considering a simple supply-demand model, a minimum wage rate above an equilibrium will lead to a higher supply of labor over demand of labor, causing surplus labor. The issue of minimum wage rate is very complex with possible negative consequences on the economy. However, at the same time they do decrease income inequality in a country and the topic possibly requires further study. Bibliography

http://www.economist.com/blogs/buttonwood/2016/04/minimum-wages

http://www.usnews.com/news/articles/2015-12-22/minimum-wage-increase-comes-with-cadre-of-potential-complications

 

(2) Discussion Post for Response to (KJ)

During my research on the internet searching for a the effects of minimum-wage increase on the U.S. economy I have found several interesting thoughts.  First of all the front main point of topic is that it is possible increasing minimum wage and employment at the same time.  Exclusively, from the Seattle minimum wage increase to $15 has proven that policy has worked. Specifically the unemployment rate dropped roughly 17 percent. 

However, the minimum wage increase does adversely effect businesses.  The businesses in Seattle are rather concerned about raising menu prices or finding other ways to compensate for the paid labor.  

The city of Seattle is also seeing a larger trend of closing restaurants since the policy has been approved and announced.  The amount of labor being paid at $15 has decreased.  

Sources:  

 

Worstall, T. (2015, March 16). We Are Seeing The Effects Of Seattle’s $15 An Hour Minimum Wage. Retrieved from http://www.forbes.com/sites/timworstall/2015/03/16/we-are-seeing-the-effects-of-seattles-15-an-hour-minimum-wage/#68bb0d8a715a

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