Public Policy - Research Paper Example

Public Policy Introduction Public policy, the body of principles that highlight the process of legal and governmental actions and systems, is of primary importance to any society as it addresses the social, moral and economic values of that society and reflects the social values of different kinds of people which vary in diverse cultures and change over time. Therefore, the public policy of a nation and society offers the nutshell of its overall principles, value system, and social, moral and economic systems and beliefs. It can also be comprehended as the course of action or inaction taken by governmental entities in connection with a particular issue or set of issues of a particular society. The public policy issues touch every aspect of the lives of individuals within a society and therefore the adoption of every public policy has a great impact on the progress of the society. In the contemporary society, the concept of public policy denotes the end result of policies which affect the larger framework of the society as well as it refers more broadly to the process of decision-making and investigation of various governmental decisions that result in the general policies of the society. The most common public policy issues include corporate takeovers, minimum wage laws, compulsory unionization, price controls, antitrust laws, occupational licensure, Social Security, antidiscrimination laws, zoning laws, consumer protection laws, environmental laws etc. These are the areas in which governmental intervention is found most important and the public policy adopted on these vital issues affect large scale individuals. Minimum wage laws offer one of the most fundamental areas of research in connection with public policy and the various political, economic and social aspects of the question needs to be clearly understood in order to make an unprejudiced conclusion on the topic. “For the most part, since its inception in 1938, the minimum wage has hovered at around 50 percent of average annual hourly wages for production and non-supervisory workers. Between 1981 and 1989, the minimum wage fell below 40 percent, and it again fell below 40 percent between 1990 and 1996. For some, the failure of the minimum wage to keep pace with inflation is a matter of deliberate government policy aimed at creating a low-wage economy. For others - mainly the mainstream of the economics profession - the fact that the minimum wage was not increased is a testament to the soundness of economic analysis that holds minimum wage increases to be detrimental to the economy as a whole.” (Levin-Waldman, 1998, 773) Though both these perspectives are problematic, they refer to some of the vital public policy issues connected with minimum wage laws. The minimum wage laws offer one of the most important public policy issues in the contemporary societies and it is a political issue as much as it is an economic issue of serious consideration. Though it is frequently realized as one of the most pertinent economic issues, the minimum wages issue needs to be understood as a more important political issue as it touches almost every aspect of political models and philosophies. According to Waldman, “the minimum wage, as much as it is a serious economic issue, is above all else a political one. The minimum wage is a political issue on several levels. On one level, there are the politics surrounding the choice of models. On another level, there are the political interests of those who engage in the debate. Unlike entitlement programs, the minimum wage is not indexed to inflation, but requires an act of Congress for changes to be made.” (Levin-Waldman, 1998, 773) Therefore, the models of government and the political machinery dealing with this economic issue have a vital role in determining the public policy considerations of the question. In other words, due to the political intervention of this vital economic issue, the chances of effectively dealing with the problem are reduced. The libertarian perspectives of the political involvement can result in a favorable economic and public policy for the people of the contemporary society and it is a major way to resolve the public policy issues of minimum wage. Therefore the philosophical and constitutional issues as well as the economic logic concerning the public policy issues of minimum wage suggests that the libertarian model of governmental intervention in the economic surroundings of the contemporary world can resolve the public policy issues concerning minimum wage and a free market or the lack of government regulation is the need of the period. The Philosophical and Constitutional Issues surrounding Minimum Wage Laws as a Public Policy Issue The major philosophical and constitutional issues relating to the public policy issue of minimum wage and the politics of the federal minimum wage program has been one of the central issues of concern. Therefore, a prominent view is that, even though the minimum wage is an economic regulatory policy, a politics of symbolism more than anything else defines the political contests that from time to time erupt over it. According to Jerold L. Waltman, the political economy of citizenship needs to stand together with the economic arguments that now control the minimum wage debate. “For many years, political scientists spent most of their time analyzing the political process. Careful case studies focused on the interplay of interest groups, political parties, legislative committees, the president, and a variety of other actors. The result of political activity, the statute or administrative order, was viewed exclusively as a dependent variable. Politics perforce determined the content of public policy.” (Waltman, 2000, 1) Therefore, the validity of politics of minimum wage as a public policy cannot be ignored in any discussions of the philosophical and constitutional issues relating to the public policy issue of minimum wage. As the major philosophical and constitutional issues concerning the public policy issue of minimum has been the political question of the matter, it is important to have a serious understanding of the variety of political issues surrounding the minimum wage. It is important to examine how the politics in the choice of methodological models can lead to different ideological positions, which ultimately will determine the central actions in the political arena concerning the public policy of minimum wage. In a thorough examination of the competing models and the ideological implications of the public policy of minimum wage, it becomes lucid that some particular model always becomes the political focus of the debate at the expense of others which is the best evidence to suggest that the issue has been ripe for political manipulation. There are also strong arguments which propose that the theoretical economic models of dealing with the public policy issue of minimum wage do not have a serious bearing. Therefore, “given the fact that empirical data on the effects of the minimum wage have been ambiguous at best - a fact that in and of itself makes the choice of models political with regards to implications - it is more likely that minimum wage increases will occur when there is strong political support for them. That is, theoretical constructs can continue to live in the absence of data that can either prove or disprove them. As long as theory is all we have, the strength of the theoretical constructs in the political arena is contingent on the strength of the respective interests behind them.” (Levin-Waldman, 1998, 773) Therefore, the political perspectives of the question suggest the most compelling philosophical issue concerning the public policy issue of minimum wage and it is important to take a reflective analysis of the philosophical bases of this political as well as economic issue. The public policy issue of minimum wage is a constitutional issue as much as it is a philosophical issue and, at both the levels, minimum wage is comprehended as an economic policy issue in the contemporary setting. Significantly, in the modern world, the minimum wage is commonly viewed as an economic policy issue, whereas it was a constitutional issue earlier. “There were essentially two questions, neither of which is mutually exclusive. One was whether a minimum wage violated the property rights of employers to regulate the way they run their business. Could government legitimately interfere with a business in the name of improving working conditions? The other question was whether a minimum wage violated the liberty of individuals to freely negotiate contracts?” (Levin-Waldman, 61) Therefore, the constitutional issues concerning the public policy issue of minimum wage relate to the political and philosophical issues of the same question. In a profound analysis of the philosophical and constitutional issues concerning the public policy issue of minimum wage, one finds the most significant link to the relevance of libertarian perspectives of social models. In other words, the philosophical and constitutional issues of the public policy issue of minimum wage suggest that the libertarian model of government which caters to the freedom of the individuals in an economic condition can best serve to resolve the public policy issue of minimum wage. The Economic Logic of the Public Policy Issues concerning Minimum Wage The lack of considerable economic logic is the basic issue associated with the public policy issue of minimum wage and mistakes are often made in economics by analysts due to the lack of such a logical thinking when approaching vital public policy issues such as the minimum wage. The controversies concerning the minimum wage are essentially the result of a neglect of essential economic thought and logic and such reflective analysis of the issues concerning the public policy of minimum wage only favors the cause of the larger sections of the society including the low paid workers. Therefore, an approach of the public policy issues of minimum wage on the basis of clear and precise economic logic can serve in resolving the larger conflicts surrounding the issue. “A minimum wage law set above the market clearing wage rate will cause some unemployment. The extent of the unemployment effect, and the manner in which that effect will be felt depends on the extent of the deviation from the market clearing wage, and the margin of decision for employers in adjusting to the change in the legal wage rate. What can be established fairly clearly is the tendency and direction of the effect. Wage rates set above the market clearing level by law will result in disproportionately harming lower wage workers — i.e. the least well-off workers.” (Boettke, 23) Therefore, the economic logic as well as a consideration of the philosophical and constitutional issues concerning minimum wages suggests that a libertarian model of government which gives freedom to the individuals in an economic condition with no great government intervention can best resolve the issues. Consequently, it is important to have a clear idea about the economic consequences of minimum wages. It I essential to have a clear idea about the economic arguments for and against a minimum wage which can determine a logical public policy concerning the minimum wage issues. Therefore, the most prominent argument for against a minimum wage is that it increases the purchasing power of the individuals. Another significant argument suggests that a minimum wage has a major impact on the productivity of the workers and there will be an increase in the productivity of the individual. There are also critics who suggest that imposing a minimum wage removes public subsidies from certain businesses. An important political argument is associated with these economic arguments which states that minimum wage is one of the few poverty fighting strategies which requires almost no commitment from the taxpayers. However, there are important moral and economic arguments which counter these perspectives. Thus, the moral position against a minimum wage is promulgated by those who believe that market has a theological status and the individual economic choice is a sanctified right. Accordingly, any intervention in market prices is consequently wrong as well as sinful and the minimum wage is closer to an abomination. However, the economic arguments against a minimum wage have a greater economic logic behind them and they argue that the minimum wage cannot serve the interests of the common man. “By far, the most commonly voiced economic argument against a minimum wage is that it leads to unemployment, and, further, that the job layoffs will be concentrated among the most vulnerable workers, those new to the labor market and those with the fewest skills. The logic is straightforward, ‘Economics 101,’ as its proponents like to say. The prices of goods and services are determined by the forces of supply and demand. If government sets an artificially high price for any product or service, it will dampen the demand for it since less will be bought at a higher price than a lower price. When the cost of labor goes up, therefore, employers will be forced to lay off workers (or at least reduce hours and benefits).” (Waltman, 2007, 14) Therefore, a governmental intervention in the free process of economic activity reduces the chances of equal and righteous service to the large sections of the society and it harms the benefits to the common man, rather than serving their interests. Literature Review: the Economic Studies on the Public Policy Issues of Minimum Wage A profound analysis of the available literature on the economic logic of the public policy issues relating to minimum wage suggests that government intervention in the economic activity concerning minimum wages cannot resolve the issues in the area. Rather, such interventions can only reduce the progress of the economic growth and can rarely benefit the interests of the common man. The economic arguments against the attempts for a minimum wage have a greater economic logic and they suggest that governmental intervention to determine the minimum wage can only weaken the economic progress of the society, rather than serve the interests of the common man. Similarly, the recent empirical studies have led the minimum wage legislation necessarily leads to greater unemployment. They also propose that the minimum wages can result in inflation. Thus, it is important to consider the truism that it is natural for business to seek to pass on to consumers cost increases of any kind. As the cost of labor rises due to a minimum wage, it is natural tendency for the firms to raise prices which affects the consumers. In other words, rise in labor cost will be reflected in the cost of products and the price of labor determines the price of products. As the minimum wage policy is redistributive, it will also result in inflation. The minimum wage policy also can result in business failures, along with unemployment and inflation. A business has three main choices when there is such a policy of minimum wages. It may reduce the labor costs by pruning workers or hours, or it may raise prices of products, or it may absorb the increased costs by accepting lower profits. All these choices result not in favor of the business and customers, but against. “A final economic critique of the minimum wage is that as an antipoverty measure it is poorly targeted. Many if not most minimum wage workers are young people living with their parents, so this argument goes. They do not come from poor households and are not really supporting a family. Thus, the bulk of the benefits will go not to the poor but to relatively affluent teens. There are far better ways to target help to the poor, it is said, the most popular of which is some form of tax credit for earnings that slowly phases out as income rises.” (Waltman, 2007, 15) The opponents of the minimum wage emphasize that the most effective way to lift people from poverty is the economic growth and increased productivity which will, in turn, create more jobs and higher wages. The benefits of such measures will be enjoyed by those people who are at the bottom of the economic ladder as well as others. Therefore, it is important that public policies are designed in order to encourage business expansion and growth along with the creation of more highly trained work force. In the United States a minimum wage rate was legislated since the Fair Labor Standards Act passed in 1938. However, the consequences of such minimum wage indexing are not favorable to the progress of the economy. The minimum wage fell proportionate to prices and average wages in the U.S. economy during the 1980s. The minimum wage would be $5.51 in 1993, if the minimum to average wage ratio was stable at that level in the 1980s and maintained through the 1970s. “If the 1993 minimum wage had increased to $5.51, payments to minimum wage workers would have increased by an estimated $20.3 billion, and the number of people earning that wage would have risen from 2.0 million to 14.7 million. Elasticity estimates generated from other studies indicate that employment would have fallen 240,000 (4.4%) among 16-19 year olds and 349,000 (3.0%) among 20-24 year olds. Wage payments to minimum wage workers would have substantially increased, but the effect on family income distribution would have been small. Many minimum wage workers are children living with parents or adults in a family with other earners. Consequently, 75% of minimum wage workers account for less than hay of their family’s income.” (Even and MacPherson, 67) Therefore, the consequences of minimum wage indexing are significant to consider in an analysis of the impact of government intervention in determining minimum wage. There are several proponents of minimum wage who by and large point out that it has equalizing effects on income distribution. They also argue that increasing the minimum wage has a major influence on reducing poverty. However, the opponents of minimum wage severely counter these arguments by pointing out that many minimum wage workers are in families with middle or high incomes. The opponents of a higher minimum wage are also emphatic about the potential employment loss due to minimum wage loss. “If that loss is sufficiently large and concentrated among low income families, a higher minimum wage could worsen poverty. The effect of minimum wage on employment has received a good deal of attention recently... Indexing opponents’ simplest argument is on the same grounds that some economists argue against a minimum wage. If a minimum wage is ‘bad’ and yet cannot be repealed legislatively, then an alternative is gradually to repeal it by allowing inflation to erode its value.” (Even and MacPherson, 68) Therefore, the arguments made by the opponents of minimum wage indexing and those by the opponents of a minimum wage have the same basis and they argue that the government intervention to fix the minimum wages cannot resolve the issues concerning the matter, but only can worsen the situation. Significantly, the United States and several other countries make use of legal minimum wages in order to augment the lowest wages. However, according to several researches in the field, the minimum wage has potentially unfavorable employment effects which augment the criticisms against such policies. In a significant analysis on the topic, R. D. Husby suggests that an alternative policy combining a minimum wage and a wage subsidy is superior to either by itself and this can assist the low wage worker, avoid unemployment effects, and maximize market efficiency. “Critics charge that the minimum wage at best is a blunt instrument in the fight against poverty. Studies indicate that many minimum-wage earners are the secondary family workers in middle- and higher-income families… The minimum wage also suffers as an anti-poverty device in that it does not vary with family size. A single full-time full year minimum-wage earner is above the poverty line, but the same wage leaves a family of three or more below the poverty line. Legislating higher minimums for larger families would not solve the problem, however.” (Husby, 30) In short, more recent research literature suggests the importance of reducing the governmental interference in public policy concerning minimum wages and the limitations of the adoption of minimum wages surpass its benefits. Similarly, the criticisms of the minimum wage exceed the arguments in favor of its legal adoption in a society or a nation. There are also convincing evidences of the failures of legal minimum wages from the examples of great nations such as the US and the UK. Therefore, it is important to realize that only a libertarian society or mode of government can deal with the issues which the proponents of minimum wage claim that the public policy of minimum wages sort out. Conclusion and Recommendations Public policy is an area of serious debates and conflicts in the social, economic, and political spheres of contemporary and the exceedingly diverse patterns of political activity across different issues cannot be met by any single model of the policy process. However, such a difficulty with the nature of public policy issues does not indicate that all the issues are idiosyncratic. On the contrary, it is clear-cut to identify that distinctively different patterns of politics lay beneath different types of public policy issues and politics determine the public policy concerning different vital issues of social living. While the validity and integrity of such an intervention by the political forces as well as governmental organizations in the various public policy issues are questionable, it is also important to comprehend that individuals have the right to expect the workings of a free state of libertarian society. In fact, one of the most excellent options to deal with the several issues of public policy is such a libertarian mode of government in which the intervention of the state in the private interests of the individuals is minimal. Therefore, there are different public policy types which are used in dealing with public policy issues. According to Lowi (1964), there are three different policy types, and he termed them distributive, regulative, and redistributive. In fact, these three different policy types trigger a distinctively different pattern of political behavior. “The scheme is based on the following argument: (1) The types of relationships to be found among people are determined by their expectations--by what they hope to achieve or get from relating to others. (2) In politics, expectations are determined by governmental outputs or policies. (3) Therefore, a political relationship is determined by the type of policy at stake, so that for every type of policy there is likely to be a distinctive type of political relationship.” (Lowi, 688) In dealing with the public policy issue of minimum wages, it is important to determine, primarily, which mode of government can mostly benefit the cause of the individuals, including the ‘wage beneficiary’ and the ‘wage benefactor’. High modes of government intervention naturally result in public policies that favor minimum wages and the most significant examples are the public policies adopted by the US and the UK. In the United States, a minimum wage rate was legislated since the Fair Labor Standards Act passed in 1938. However, the consequences of such a minimum wage indexing are not favorable to the progress of the economy, nor for the progress of low income groups of the nation. All these examples make one consider alternative methods in which the government intervention in public policies, in general, and in the policy issue of minimum wage, in particular, is minimal. In fact, the limitations of a public policy which adopts minimum wage as a major solution to the problems of low income groups tend to convince of a better alternative in which minimum wages is not fixed. The economic logic and arguments prove that the limitations of public policy issues concerning minimum wages far exceed the advantages. Significantly, the models of government and the political machinery dealing with this economic issue have a vital role in determining the public policy considerations of the question. In other words, due to the political intervention of this vital economic issue, the chances of effectively dealing with the problem are reduced. The libertarian perspectives of the political involvement can result in a favorable economic and public policy for the people of the contemporary society and it is a major way to resolve the public policy issues of minimum wage. According to arguments of the philosophical and constitutional issues as well as the economic logic concerning the public policy issues of minimum wage, the libertarian model of governmental intervention in the economic surroundings of the contemporary world is the most effective method of dealing with the issues. The limitations of the public policy of adopting minimum wages ultimately suggest that the governmental intervention to determine such vital public policy issues needs to be limited. Works Cited Boettke, Peter J. Calculation and Coordination: Essays on Socialism and Transitional Political Economy. New York: Routledge. 2001. Even, William E. and David A. MacPherson. “Consequences of Minimum Wage Indexing.” Contemporary Economic Policy. Vol. 14. Iss. 4. 1996. P 67. Husby, R. D. “The Minimum Wage, Wage Subsidies and Poverty.” Contemporary Policy Issues. Vol. 11. Iss. 3. 1993. P 30. Levin-Waldman, Oren M. “Exploring the Politics of the Minimum Wage.” Journal of Economic Issues. Vol. 32. Iss. 3. 1998. P 773. Levin-Waldman, Oren M. The Case of the Minimum Wage: Competing Policy Models. SUNY Press. 2001. P 61. Lowi, Theodore J. “American Business, Public Policy, Case Studies, and Political Theory.” World Politics. Vol. 16. 1964. P 677-715. Waltman, Jerold L. Minimum Wage Policy in Great Britain and the United States. Algora Publishing. 2007. P 14. Waltman, Jerold L. The Politics of the Minimum Wage. New York: University of Illinois Press. 2000. P 1. Read More