In his State of the Union address, President Obama
said he wants to increase the minimum federal wages for workers to $10.10. Two
months later, Connecticut did exactly the same. According to the article, on
Wednesday March 26, Connecticut lawmakers became the first in the country to
pass legislation that would increase a state’s minimum wage to $10.10 an hour
by 2017. The bill was approved 21 to 14 in the Senate and 87 to 54 in the
House.
There are controversies regarding this matter. Advocates,
including president Obama, believe that Connecticut’s vote cleared the way for
other states. However, Legislative Republicans and
various business groups criticized the increase as another action making
Connecticut uncompetitive, as it hurts business, especially smaller ones.
Increasing minimum wages may seem to be a good way
to reduce poverty, but it is true only
when the economy is doing very well. If minimum wages increase while firms do
not make more money, fewer people will be employed, and some may even be fired
because their employers cannot afford to pay them. That will make poverty even worse in the US and will hurt the
recovering economy, especially when the unemployment rate now is still a
concern and is decreasing at a slow rate. Connecticut set policy for the year
of 2017, which means it believes the economy must be growing at that time. This
assumption can be true, but can also be overoptimistic, consider the slow
recovery rate of the economy.
http://www.nytimes.com/2014/03/27/nyregion/connecticut-is-increasing-hourly-pay-to-10-10.html?ref=economy
6 comments:
I do agree that raising minimum wage, hypothetically, may be a good way to reduce poverty. However, in a realistic sense, I feel that such policies might not be as effective as we would optimistically hope, because companies may increase the wages, but possibly cut other "fringe" benefits that contribute to overall compensation per worker. I feel that if we are to raise the minimum wage, there needs to be some other policy in addition that would deter or prevent companies from cutting a worker's overall compensation.
Raising the minimum wage will cause companies to be able to afford some of their employees. The profits of companies may not increase enough in order to pay their employees $10.10.
I agree that raising the minimum wage will cause problems for firms and employment; a raise in the minimum wage will cause firms to compensate the cost in other ways, which could lower employment or cause firms to loose profit. This will be a concern for the recovering economy. I do not think raising the minimum wage is the way to raising living standards and boost the economy, especially while our economy is still recovering from the great recession.
I think that the current minimum wage is too low, but I can also see the problems in raising it as well. It will be interesting to see how this affects businesses and poverty in Connecticut and could set an example for the rest of the states.
While this seems like it could help reduce poverty, it will actually reduce the number of jobs the entire economy of Conn. has. It will cause employers to reduce the number of employees they hire and reduce the hours of those that currently work for them. This seems like a good idea, but in practice it does not seem like it would work. Some economists believe this might work, but other do not.
In theory, raising the minimum wage stimulate economies because workers will have a higher amount of disposal income due to their increased wage. In turn it will also decrease the number of workers a firm can employ because it will need to decrease their employees to maintain their profit margins. Raising the minimum wage however might not be best suited for those who are dependent on that wage for a living. For example, many college students have part-time jobs in the summer/winter, but would still benefit from this wage increase. A technique that might be better suited for those employees who have to provide for a family is a "living wage." The poverty line in the United States is $23,400 and the $10.10 minimum wage would only provide a yearly income of around $21,000 which is less than the poverty line. So, in order to solve the high amount of Americans under the poverty line might be a increase to a living wage.
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