Minimum Wage: Should It Be Higher or Lower, Essay Example

A minimum wage is a standard stipulated by a government for anybody working within the confines of that country. The country’s resources, economy, population and the pattern of distribution of all these entities are the vital factors which influence the feasibility and the final decision for prescribing a minimum wage pattern for the masses. A prescribed minimum wage sets a standard for the industry within a country which ensures smooth running and cooperation between the management and the workers. In a democratic country the minimum wages are decided by laws which stipulate the basic standards as decided by the elected representatives of the people and the nominated experts for the purpose.

The idea for a minimum wage originated in Australia and New Zealand in the 1890s, when frequent strikes led to its conception as a mode to justify certain standards of payment for human labor (Fitzpatrick, 2009). In the United States, in the earlier parts of the twentieth century, a lot of dithering decisions, either in favor, or against a minimum wage were taken until the first federal minimum wage law known as the ‘The Fair Labor Standards Act’ was passed in 1938. The new law stipulated the minimum amount which was to be paid to a worker as well defined the weekly work ceiling for a standard employee within the country, along with a ban on child labor. According to the then President of the United States, Franklin Roosevelt, who was primarily instrumental in the enactment of this law, “Wages must ensure a “minimum standard of living necessary for health, efficiency and general well-being without substantially curtailing employment” (Fitzpatrick, 2009). Since then, the minimum wages in the United States have maintained certain standards which have worked in a cohesive manner for the mutual benefit for the organizations as well as the workers. A prescribed minimum wage tends to eliminate the differences within and outside the organizations and sets standards for expectations of the workers who work better with a reassurance that they are being paid appropriately for their efforts. However, economists have differed in their opinions about minimum wages as some of them believe that it eliminates the independence of the organizations to plan their working according to their actual requirements as they tend to be bound by meeting specific standards for payment of wages which may not be required or practicable within their means and peculiar situations. Such organizations may have been run in a better way by developing their own wage structure according to the skills and remuneration according to inputs and individual contributions.

A minimum wage is not necessarily evaluated in terms of the gross money being doled out to the workers with respect to the time they spend on their jobs but ts real value is obtained after settling for other factors such as the economic situation within the country and the actual buying power of the currency. Fluctuations in minimum wages have therefore occurred in the time-line of history with a lot of controversies and corrections based on economic patterns. Within the United States itself, the minimum wage standards have not been applied uniformly across the country in history. Certain states do have the same minimum wage rates as the federal standard, but others may have rates higher, lower or with no minimum wage laws at all, especially as applicable for the non-supervisory, non-farm private sector employment (www.dol.gov).   In cases where an employee is subject to both the state and federal minimum wage laws, the employee is entitled to the higher of the two minimum wages (www.dol.gov).

Under the present law, a minimum wage is to be paid to all employees by any organization or enterprise which does at least a $ 50, 000 business in a year, to employees of smaller firms who are engaged in production of goods for commerce, interstate commerce, workers in the transportation and the communications sectors, employees of federal, state or local government agencies, hospitals, schools as well as domestic workers (usgovinfo.about.com). The U.S. Department of Labor is responsible for ensuring the enforcement of the minimum wage law through it’s ‘Wage and Hour Division’ for general organizations within a state while the U.S. Office of Personnel Management is entrusted with this responsibility for employees of Executive Branch Agencies and the U.S. Congress, for employees of the legislative branches (usgovinfo.about.com). In case of any violation of the minimum wage law, the district Wage and Hour division can be approached by the affected party.

The state and the federal minimum wage has increased steadily over the last few decades in a parallel manner from $ 1.60 per hour in the early 1970s to the present $ 7.25 per hour, which became effective from 24^th of July, 2009 (erd.dli.mt.gov). The latest raise was necessitated due to the declining purchasing power of the U.S. Dollar and the difficulties and economic hardships being faced by the citizens due to the ongoing recession. The purchasing power of the Dollar is the actual index by which the real wage increase is determined. In order to ascertain the real value of a minimum wage, it has to be evaluated in terms of the purchasing power as determined in a specific period of time. When adjusted to the 2007 purchasing power of the U.S. Dollar, the 1968 minimum wage was found to be the highest in history, at $ 9.47 (oregonstate.edu). Translated into layman terms, an hour’s minimum wage in 1968 was able to buy 5 gallons of gas while in 2006 it was only able to buy 2 gallons (Fitzpatrick, 2009). Inflation, therefore is a vital determinant of the actual value of minimum wages.

Although the latest minimum wage boost is aimed at addressing poverty and providing a more rational wage structure to almost 4.5 million workers within the united States, it still falls short of the standards existing from 1961-1981, when adjusted to the present level of inflationary trends (Filion, 2009). However, the latest boost will raise the wages of low income workers as well as benefit working families within most of the states. The minimum wage increases usually benefit the most disadvantaged sections of the society such as women workers as well as workers from ethnic minorities such as African Americans and Hispanics. The recent rising figures of poverty and joblessness within the United States had necessitated the recent hike in the minimum wages. This fact is reinforced from the previous information that there has been no evidence of any job loss in history due to previous minimum wage hikes (Filion, 2009). New economic models have suggested that employers are able to absorb some of the costs of a wage increase through higher productivity achieved by modern management techniques, lower recruiting and training costs, a decrease in absenteeism and the high worker morale due to wage hike (Filion, 2009). An increased minimum wage also results in higher consumer spending which indirectly boosts the country’s economy.

The present economic scenario is a bleak one with the country struggling to revive its economy after the double setbacks of terrorism and the gulf war. Increasing competition from other developed as well as developing countries has placed tremendous pressure on the United States to stabilize and revive its dominating position in the world economic scenario. Internal dissatisfaction and unemployment are the major issues which need to be addressed by adopting a feasible  economic strategy, a minimum wage hike being one of the major factors to boost the sagging morale of the labor force, which forms the backbone of any country. The recent hike in 2009, though when translated into the dollar’s purchasing power may not be as good as in the past, but is definitely a positive step which has already started showing positive results in terms of the growing confidence among people and the gradual economic recovery. Such boosts in minimum wages tend to enthuse the workers to perform with a more invigorated effort and also strengthens the consumer’s buying power which indirectly boosts a country’s economy. Minimum wage hikes are therefore necessary from time to time and they should be encouraged periodically to boost the public confidence in the elected governments within a democracy. Any such hike should however incorporate a sound decision by pertinent economic experts so that it is in total compliance with the actual economic weaknesses and strengths within as well as outside the country so that it is sustainable in the long run.

Works Cited

Filion, K. 2009. Fact sheet for 2009 Minimum Wage Increase, online document accessed January 3, 2010 at: http://epi.3cdn.net/9f5a60cec02393cbe4_a4m6b5t1v.pdf

Fitzpatrick, L. 2009. A Brief History of The Minimum Wage, online report accessed January 3, 2010 at: http://www.time.com/time/nation/article/0,8599,1912435,00.html

Minimum Wage History, online document accessed January 4, 2010 at: http://erd.dli.mt.gov/LaborStandard/documents/minimumwagehistory.pdf

Minimum Wage History, online article accessed January 3, 2010 at: http://oregonstate.edu/instruct/anth484/minwage.html

The Federal Minimum Wage, online article accessed January 4, 2010 at: http://usgovinfo.about.com/blminimumwage.htm

Wage and Hour Division (WHD), Minimum Wage Laws in the States – January 1, 2010, Historical Table, accessed January 3, 2010 at: http://www.dol.gov/whd/minwage/america.htm#content