Entitlement Programs and Business

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What are the effects of minimum wage and welfare in our business communities? Often when we hear about minimum wage and welfare we think about the humanitarian efforts of our government to give all United State citizens the ability to live well and have a piece of the American dream. A large portion of American small businesses and corporations provide the income for programs like these but how are these businesses being affected by these programs? Minimum wage was part of the FLSA or the Free Labor Standards Act. Free Labor Standards Act of 1938 established a minimum wage of 25 cents an hour, a 40 hour work week, overtime, recordkeeping of employee work hours and child labor laws to protect their educational opportunities. These radical changes were criticized by congress when they were first created and implemented in the 1940s. The real information that must be understood is how these changes affected the businesses at the time and continue to affect our businesses today. Some economists view the changes the FLSA enforced as a positive, not only for the humanitarian efforts but also as a boom to the economy. The idea behind this is that the workers have less working hours by having a 40 hour work week law but maintain similar or better wages with the minimum wage laws. Since businesses will still want to produce at the higher levels the employers will hire additional workers to work the extra hours or the hours beyond the 40 hours of their traditional workforce will be paid overtime. However companies reacted differently and according to labor supply and demand simply cut the hours there factories were open to limit the variable costs of additional workers or overtime hours. The economists in favor of minimum wage ration that an increase in wages and a decrease in working hours is a bonus to the economy because other workers will be hired at these higher wages to fill in the hours of the workers whose hours were cut. But if we look at the data we can see that the only thing cut was the productivity. Before FLSA was emplaced the Gross Domestic Product in 1937 was 269.9 billion dollars in currency. In 1938 with only half a year of FLSA we see it drops to 266.2 and again in 1940 to 265.2. From this point on the GDP picks up but this is mostly due to World War 2 and direct government control for a specific purpose that was widely accepted by the people. Once World War 2 ended our national debt continued to grow due to these programs that are unsustainable. America has since lost entire industries’ to countries without labor laws because companies will always try to maximize profits and minimize losses. The economist’s against the minimum wage law say that along with the data proving the GDP had fallen the long term economy has also suffered. Based on the data from Dr. Peter Brandon of the Institute for Research on Poverty raising the minimum wage also keeps welfare moms on welfare 44 percent longer then in states that do not raise there minimum wage. The fallacies surrounding minimum wage and welfare have prevented research on economies and labor markets without this burden and the effect on their poor. The welfare program we know today started in 1935 under President Roosevelt; it was part of the Social Security Act. There are four sub-programs; Medicaid, food stamps, Aid to Families with Dependent Children (AFDC), and finally Federal and State housing benefits better known as low income housing. These programs create dependency for those that initially join seeking help. The welfare programs create dependency by providing a lifestyle outside the means of a low income family and punish the families that attempt to find employment in the form of diminishing returns on income earned vs. income given by taking away a greater amount of funding for every dollar earned. The goal of the welfare program is to aid those in their time of need until such a time that they can get back on their feet. This...
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