Minimum Wage Rase in America

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The USA runs one of the largest economies in the world, with over 22 percent of the country's production total. The nation makes up approximately 17% of the global gross commodities. The nation reported more than GDP of 18.46 trillion dollars in 2016, on the basis of the tremendous economic performance recorded by the United States. It should be noted that the currency of the nation is the most commonly used currency for business transactions around the world and is one of the most stable mixed economies in the world, sponsored by government, the military and technology. The primary feature of the US economy is a steady yearly GDP growth rate, high-level economic research, massive capital investment and moderate unemployment rate. After providing this background, there is need also to point out that no matter how big and stable the US economy is, it is also affected by specific microeconomic factors. Therefore this study is developed to provide a vivid description of the effects rising minimum wage on the United States economy, (Mester, 2016).

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A minimum wage can be defined as the lowest amount of money that should be paid for the labor service of an individual with an economy. The figure is usually based on the consideration of the price level of good and service of a country, and it is also determined by the economic level of such country, ( David, 2016). In the United States, the minimum wage is a combination of a network with includes federal state and law government. Hence all employers are expected to pay the highest minimum wage as prescribed by the government; therefore the current minimum wage of $7.25 was specified. There have been recent calls for the need to increase the minimum wage from its current level to $15 per hour. The effect of such decision will have ramifications on certain aspects of the economy. First, the US labor force consists of about 158.7 million people, and about 47% of these people are paid hourly. An increase in the current minimum wage will see a raise in the current wage rate i.e. the government and other employers will have to pay more in the form of salaries to their employees, (David, 2016). The primary effect of increased government spending on wages is a concomitant reduction in the level of funds available for investment in other sectors of the US economy. If the government pays $15 an hour to its several millions of employees, then there are tendencies for it to cut down its level of spending and investment in other social sectors such as Medicare and infrastructural developments.

The US economy also consists of small business, and hence they are also expected to abide by the government regulations in the case of an increased minimum wage. The decision will affect such business because a significant percentage of their total earnings are usually spent on operating expenses such as supplies, lease, inventory, mortgages, wages, and employee benefits. However the biggest of all their expenses are on the wages and employee benefits. With the implementation of an increased minimum wage, such firm is likely to operate at a loss. Therefore to remain in operation, American small business will result in hiring fewer employees or sacking their current members of staff to cope with the adverse effects of such trends. This action will lead to a surge in the rate of employment in America, (Tsao et al. 2016)

An increased minimum wage in the United States could result in an increase in the level of poverty within the America society. This submission is based on the research conducted by the Heritage Foundation in 2003. The study concluded by stating that a rising minimum wage would not reduce the level of poverty as it is supposed rather it will increase the degree of poverty within the American economy. This is because only a few percentages of the people are employed on a full-time. About 75% percent of the other total workforce in the country are not hired on full time, most of these group of people work on a part-time basis hence they are not expected to be included in the new offer in the event of an increased general pay rise. This group of people outside the scope of new pay structure will not be able to rely on the new income level as a means of supporting their standard of living. There is need to note that an increased minimum wage mostly translates to a slight increase in the general price level of goods and services within an economy. Hence those who are not included in the new minimum wage will be impoverished as the costs of items are higher and no corresponding rises in their income, (Liu et al. 2016).

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The American labor market is a community hence it is also affected by the market forces. If the government decides to increase the current minimum wage; it will result in an increase agitation for increased pay among the skilled employees. This form of agitations will be based on the need of equality since unskilled employees are getting pay rise not because of market forces but due to government policies. This situation will increase the volatility of the labor market as more skilled, and experienced employees will continuously demand an upward reassessment of their income which may not be acceptable to employers and may ultimately result in dangerous industrial actions, (Dube, 2016).

Fig oneMinimum Wage Rase in America

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After an in-depth evaluation of the adverse economic effects of an increased minimum wage in America; there is need also to consider its benefits. An increase salary level means that more people who were previously earning lower incomes within the American economy will have access to more money and this will help to boost the economy. The more money available to individuals the more they tend to spend and the more they spend, the more the economy grows. Statistics show that an increase in the current minimum wage by a dollar will increase the average spending of an American family by $2,800 annually. It must be noted that such increased spending will boost overall economic output. (Lopresti and Mumford, 2016). There is a need also to take into consideration the fact that a raised minimum wage will be of enormous benefits to American minorities which make up about 40% of wage earners the country. It will provide an immense contribution to closing the wage inequality gap as more women will benefit from an increased pay. Women currently make up about 54% of low-income earners in the country an increased minimum wage will provide a reverse to this trend and provide more income of the marginalized in the society. (Blau, 2016). An increased minimum wage could also be considered as a morale booster when a country increases its minimum wage; it affects a larger base of its workforce. This means more workers are paid more money for their service hence the tendencies of a higher level of motivation; An increase motivation increases the performance level of employees hence translating to increased output which will, in turn, stimulate the growth of the economy, (Lopresti, and Mumford, 2016).

Fig two

 

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