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Minimum Wage Effects: Beneficial or Hindrance?

By Chip3G1 Apr 13, 2013 805 Words
April 27, 2011
Formal Memo

Minimum Wage effects: Beneficial or Hindrance?

In the United States, workers are covered by the Federal Government when it comes to the worth of one’s labor. This is done through laws governing the minimal amount of pay per hour of labor. This law is called the Fair Labor Standard Act (FSLA). Currently, the minimum wage is set at $7.25. This is much higher than previous amounts. During economically difficult times, the Federal Government may deem it necessary to raise the minimum wage. This decision has many effects upon the nation financially. In 2007, the Federal Government proposed and enforced a series of increases with the results being $7.25 as of July 24, 2009 (Women’s Health Weekly). This increase has a direct effect on workers and employers. For those employees earning less then the new minimum wage, the gain in income was very welcome. This additional income will allow individuals to begin to pay off debt or more easily afford groceries and other necessities. For the workers of minimum wage jobs who managed to live within their means and avoid debt, this increase could potentially provide a better standard of living. Perhaps, the increase of the paychecks will be enough to afford purchasing a better car or even a better residence. Some individuals who are fiscally responsible may even decide to save the difference or invest it in stock options or IRA’s to help build a better foundation to a higher standard of living. With this positive effect on workers come the adverse effects to the employers. For large scale companies such as corporations, the requirement to pay employees more does not have a large impact on a company’s ability to operate as well as it has been. For small scale companies like family owned business, this new expense on payroll is a big deal. It could potentially influences the company to cut employees hours or even reduce the number of employees. In any case, large or small scale, companies do not want to have reduced profit margins. Often, companies will determine what areas can be changed to compensate for this new expense. For instance, a produce market may consider buying locally grown foods in order to reduce shipping cost. For items that cannot be bought locally companies can consider changing purchasing patterns. This means to move from buying a small amount at a time to instead purchasing in bulk. Purchasing in bulk allows a company to receive additional discounts on what they buy. Unfortunately, the easiest way companies tend to maintain profit margins without directly affecting its employees is by increasing the cost of its products or services. When a company increases the cost of goods and service, the general public is affected. For example, a McDonald’s double cheeseburger used to cost $1.09 including tax, now the same burger cost $1.18 with tax. Also, a company may decide not to change its price, instead changing the product sold to reflect the difference. For instance, The McDonald’s cheeseburger that was $1.09 is also sold at the same price, but with one less piece of cheese. This method of compensating for increase wage expense is not limited to fast-food as it reaches to any and every conceivable business. As the prices go up, people have to spend more hard earned money and receive the same or less of a product that contributes to what is considered the cost of living. This cost of living affects the entire public regardless of how much or little one makes. For those workers blessed with jobs above minimum wage, the increase in minimum wage does not affect their income in either a positive or negative way. However, the increase in minimum wage does bring forth a higher cost of living which does affect the above minimum wage workers. It affects them significantly as they must spend more while still making the same amount unlike those who were at or below the previous minimum wage. The minimum wage workers are earning more but are also spending more due to higher cost of living, thus are never really gaining anything. In closing, as the minimum wage workers maintain the same financial burdens as before the increase and the lower wage earners are then placed in a more financially difficult situation, increasing minimum wage does not seem to be proficient in raising the living standards of the American people since it is one of many direct influences on the cost of living. Therefore, it is the implications of this essay that increases to the minimum wage are nothing more but a hindrance.

Work Cited
"Federal minimum wage will increase to $7.25 on July 24." Women's Health Weekly 30 July 2009: 390. Global Issues In Context. Web. 26 Apr. 2011.

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