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On July 18, 2019, the house of Representatives finally passed a bill to raise the minimum wage for Americans. The bill calls for a gradual increase in the minimum wage in the United States to $15 by 2025, and will phase out the minimum tip wage paid to workers. The bill is said to be expected to lift one million Americans out of poverty. That sounds good, doesn’t it? But what I want to say is that this bill doesn’t help us much,it may even put us in a worse situation.
But if the minimum wage is raised, then the cost of employment will increase. In order to offset the increased cost, they either reduce the number of employees or increase the price of goods. If we cut jobs or reduce the number of employees, then the employment rate will fall and the unemployment rate will rise. In fact, in the past few decades, many studies have also confirmed that raising the minimum wage does reduce the employment opportunities of teenagers and other low skilled employees. For teenagers, middle school dropouts, immigrants and other low skilled employees, hourly wages are usually below this level. They find work in small shops, especially in fast-food chains and other retail outlets. If the minimum wage is raised, some people will lose their jobs, because employers will think that their productivity is not high and they are not worth spending so much money to hire them. Besides, combined with the double pressure of loan and income decline, American farmers rush to the job market, which will make the already scarce employment opportunities more tense.
As we all know, the current global economic situation is not very optimistic, and the economic growth of the United States is slowing down. At this time, major enterprises will reduce the number of recruiters or layoffs. According to the data, the number of jobs in the United States in June was 102000, nearly 40000 less than the expected 140000. In addition, in the first half of this year, American enterprises cut 331000 jobs, an increase of 35%. The house of Representatives has called for a minimum wage increase of $15, which could lift more than one million people out of poverty, but the CBO has also warned that raising the minimum wage could put between one and three million people out of work. If the minimum wage is raised, the data may reach a higher level.
Ricky and other officials often take another study which was made by Princeton University economists David Card and Alan B. Krueger, to support the argument that raising the minimum wage does not reduce employment.According to Calder and Kruger, employment in New Jersey, which raised the minimum wage in 1992, and Pennsylvania, which did not raise the minimum wage, declined by the same amount. Therefore, there must be another reason for the decrease of employment in the two states, which has nothing to do with the adjustment of the minimum wage.
Some people think there are serious flaws in these studies, and I agree with them. Professor Donald R. Deere and Professor finis R. Welch of Texas A & M University, and Professor Kevin Murphy of the University of Chicago, etc. pointed out in their research reports submitted to the January meeting of the American economic society that these studies themselves had made serious mistakes. For example, after the federal minimum wage was raised in 1990 and 1991, the employment of young people in New Jersey has been reduced much more than that in Pennsylvania. Therefore, after the minimum wage was raised by New Jersey itself in 1992, the employment of New Jersey has not declined much more than that of other states. When the federal minimum wage was raised, New Jersey’s management expected that the state’s minimum wage would be raised again, which led to a significant reduction in job opportunities.
Back to the issue of cost affecting price, the law of raising the minimum wage aims to protect vulnerable groups, but in the end, it is the most vulnerable groups that are harmed. It is useless to raise the minimum wage only through the invisible hand of the market. Some people say it depends on the intervention of the government. The government asked companies not to dismiss employees, so the company will not hire a new employee head office. As mentioned earlier, it is the employment opportunities of young unskilled workers that are most affected by the minimum wage. You may also ask that the government force the companies to employ new workers. so the companies have to hire new workers. What will happened? The production cost of our enterprise has increased and the competitiveness has declined. What else can we do? For trade protectionism, we can’t compete with China, India, can’t the government lock them out? What are the consequences? Who will bear the increased production cost transferred to the price? Consumer.
Although raising the minimum wage is ostensibly an increase in workers’ wages, employers may cut jobs and increase unemployment if the cost of employment increases. In addition, a comprehensive increase in wages may also shift the cost of prices, resulting in a rise in prices, and ordinary people are even more unable to bear the cost of living. That’s why I say that raising the minimum wage may put us in a more difficult situation.
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