As of late, wage growth has been a major issue not only in the United States but also in the Eurozone and Japan. Though labor demand has been steadily increasing within the U.S., with July of 2014 adding over 200 thousand jobs, earnings growth has not reciprocated. Analysts speculate that much of the economic recovery has been hindered due to the lack of wage growth and if consumers were more confident in the possibility of growing real wages, that would translate into economic growth. Interestingly, there has been a lot of discussion over minimum policy wage changes. A major point of news was the increase of the minimum wage to $15 per hour in Seattle. This increase applies to corporations and franchises that employ 500 people or more. Additionally, something very interesting to note is that real wages for the bottom 10% have risen by 0.3% in the last year, while the rest of the population has entirely seen a decline in real wages.
So, the issue to tackle is whether states should or should not increase minimum wage. There certainly is the economic idea that minimum wage introduces a price floor into the economy which would create a gap between labor hours demanded and labor hours supplied. Arguably, this could only affect the number of hours people work and not remove them of a job entirely. Regardless, the point is that there would be less hours of labor completed under this idea. On a positive note, we can look at the data researched by Elise Gould of the Economic Policy Institute. It shows that among the bottom 10% that did have an increase in real wages, that increase was actually +0.9% in states that instituted higher minimum wage changes and -0.1% in states without minimum wage increases. So, this data shows that with an increase in minimum wage, real wages can increase, especially for the poor who face the greatest disparity. In that sense it can help close the income gap. However there appears to be a trade-off in either situation [more people work and get paid less, or less people work (or work less hours) and get paid more]. Many people agree that the current federal minimum wage of $7.25 an hour is not an adequate floor, as 21 states have instituted higher minimum wages and research institutes like the EPI and Economic Analysis and Research Network have published much data supporting the campaign to increase wages. There certainly needs to be wage changes to support economic recovery, especially with increasing interest rates coming and the end of quantitative easing in the U.S. Through much more due diligence, an adequate wage floor can be reached.
-Neal Patel
http://www.epi.org/issues/minimum-wage/
http://www.epi.org/blog/dog-didnt-bark-wages-bottom-distribution/
http://www.washingtonpost.com/blogs/govbeat/wp/2014/06/02/seattle-to-enact-15-minimum-wage/
http://online.wsj.com/articles/despite-job-gains-no-pickup-in-wage-growth-1407034320
So, the issue to tackle is whether states should or should not increase minimum wage. There certainly is the economic idea that minimum wage introduces a price floor into the economy which would create a gap between labor hours demanded and labor hours supplied. Arguably, this could only affect the number of hours people work and not remove them of a job entirely. Regardless, the point is that there would be less hours of labor completed under this idea. On a positive note, we can look at the data researched by Elise Gould of the Economic Policy Institute. It shows that among the bottom 10% that did have an increase in real wages, that increase was actually +0.9% in states that instituted higher minimum wage changes and -0.1% in states without minimum wage increases. So, this data shows that with an increase in minimum wage, real wages can increase, especially for the poor who face the greatest disparity. In that sense it can help close the income gap. However there appears to be a trade-off in either situation [more people work and get paid less, or less people work (or work less hours) and get paid more]. Many people agree that the current federal minimum wage of $7.25 an hour is not an adequate floor, as 21 states have instituted higher minimum wages and research institutes like the EPI and Economic Analysis and Research Network have published much data supporting the campaign to increase wages. There certainly needs to be wage changes to support economic recovery, especially with increasing interest rates coming and the end of quantitative easing in the U.S. Through much more due diligence, an adequate wage floor can be reached.
-Neal Patel
http://www.epi.org/issues/minimum-wage/
http://www.epi.org/blog/dog-didnt-bark-wages-bottom-distribution/
http://www.washingtonpost.com/blogs/govbeat/wp/2014/06/02/seattle-to-enact-15-minimum-wage/
http://online.wsj.com/articles/despite-job-gains-no-pickup-in-wage-growth-1407034320
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