Minimum Wage Based on the Cost of Living - Essay Example

Necessity of Minimum Wage Based on The Cost of Living” By 22 February 22 February "Necessity of Minimum Wage Based on The Cost of Living " In today’s world the economic laws and government policies are formed around the aura of protecting human right. The aware worker or employee knows his rights and demands benefits based on his cost of living depending upon his standard of living. All over the world countries apply the minimum wage principle in their work laws in order to protect the rights of the workforce. ‘Minimum wage laws dictate the lowest price for labor that any employer may pay.’ (Mankiw 117-118) In the United States, the worker laws entail a statutory minimum wage that is generally to be paid to the workers. The current minimum wage set up by the federal government in 2009 is $7.25/hour calculating up to $15, 080 for a full time worker who works 40 hours per week per year round. The federal minimum wage is categorized into non-tipped, tipped and youth. The non-tipped wage rate is higher as compared to the minimum wage rate of tipped workers. The tipped workers make tips over and above their wage therefore their minimum wage is $2.13 that is lower than the above-mentioned non-tipped rate. The youth minimum wage rate entails all the teens i.e. people below the age of 20 years and ranges between the tipped and non-tipped rate of $4.25. The economics of the world is changing posing a question on the feasibility of the minimum wage laws. The increase in inflation, unemployment rates and the economic downturn makes it difficult for the worker to maintain a standard of living that is above the poverty line. The increase in the minimum wage has been in debate over many years now with the economists questioning the viability of the law and the level of the minimum wage. Thus the minimum wage should be parallel to the cost living and as it lacks to support the living standard it should be increased to fill in the gap. Initially, the minimum wage was enacted in 1938 by the US president Franklin Roosevelt in order to protect the workers from the effects of the great depression. The law helped in keeping the workers above the poverty line, thus helping the economic through an increased purchasing power. The United States Department of Labor shows the minimum wage prevailing in all states of America. The economic and political clashes regarding the minimum wage figure has been going on since the inception of the law. The minimum wage prevailing in a state or territory can be either less or more than the federal minimum. For example, the minimum wage rate for Arizona is $7.90 whereas that of Georgia is $5.15 applicable to employers with six or more employees (‘Minimum Wage Laws in the States – January 1, 2014) In this paper the minimum wage of Georgia will be compared with the cost of living and with other states in order to determine the increase required in the low minimum wage policy. The minimum wage rate of Georgia is $5.15 for the non-tipped worker with the tipped worker earning $2.13. The law in Georgia entails 6 or more employees under the employer, anything less than that doesn’t come under the domain of the minimum wage. The total per annum figure for this state comes around $10,712 as compared to the minimum wage of $7.25 in other states resulting an annual figure of $15,080. ‘While it’s true that Georgia’s minimum wage is $5.15 per hour, in reality, most workers are paid at least the federal minimum of $7.25 per hour.’ (Richard 1). However this wage rate that persists in Georgia is not sufficient for the cost of living in the state. The people who receive these wages are entry-level workers, working at superstores, fast-food joints etc. But the fallacy here is not only the issue of the minimum wage versus the cost of living but the fact that an increased minimum wage will result in more job elimination at the entry level. It is important to analyze the minimum wage with respect to the cost of living but the hard question is that how economical will the increase in minimum wage be with respect to the actually benefiting the entry-level workers. In terms of the increase in pays for defending the argument that the minimum wage has to be raised, the Congressional Budget Office (CBO) released a report that mentioned the effects of increasing the minimum wage to $ 9 an hour and $10.10 an hour. The calculations showed that such an increase would result in moving one million people out of the poverty slump. But the increase has it own price, for Georgia it means higher performance targets and a more stringent performance evaluation. All this will result in job loses in the for of employee inefficiency but on the other hand will make it easy for the employer to retain the employee on the better proposed minimum wage rate. The increase in minimum wage rate to $9 per hour will increase the household spending by $28 billion as per the report by the Federal Reserve Bank of Chicago that will help stir the economic growth. Thus increasing the minimum wage rate as proposed by the President Obama will have both its pros and cons. Comparing the feasibility of the minimum wage to the cost of living requires analysis the prices in Georgia. The state has a CPI index of 46.48, rent index of 12.28 and the restaurants taking a crucial part having an index of 42.15. In Georgia the distribution of cost of living shows that the biggest chunk of expenses go towards markets of perishable good, followed by the rent and restaurant culture. The high levels of luxury spending are also evident in the state. The cost of living for Georgia has increased over the years owing to increased inflation and unemployment etc. The average consumption requirement for the state has doubled in the last decade indicating the requirement to increase the minimum wage figure. Now comparing the minimum wage to the spending a major chunk is indeed spent on the market of daily requirement of perishable goods. This points to the fact that increase in the daily minimum wage would benefit the standard of living in the state. In terms of the healthcare expenditure the state show that the cost of health services is rather high and mostly unaffordable. The Georgia watch explains the perils of people facing problems of being unable to receive affordable health benefits. The health and medical bills are often very lavish thus resulting in an unaffordable domain for the low-income worker. A report done in 2009 showed that many families filled for bankruptcy on account of the medical bills. The average credit card bill was higher for low-income group worker resulting in huge debts that were impossible to pay. Over the past decade the number of Americans who are either underinsured or uninsured has increased and Georgia is a part of this statistic. The rationale for this un-insurance and underinsurance is the high medical expenses that are beyond the control of the low-end worker. The lack of healthcare affordability results in delayed healthcare treatments and Georgia is one of the top ten states, according to survey, which procrastinate preventive care due to unaffordability. The healthcare scenario in this state also points towards the fact that minimum wage should be increased to match the cost of living covering at least the basic expenses of the everyday life. The comparison of Georgia with other states shows that the population of 9.92 billion with the area of approximately 59,000 square feet is less populated than most of the states with the better common core standards. And is one of the nine states to have better core standards. However the cost of living in Georgia is high with the major chunk being attributed to the everyday perishable items. Also the healthcare in Georgia is very expensive resulting in the unaffordability and bankruptcy for many. Therefore analyzing the law of minimum wage and the situation of Georgia it is easy to conclude that the minimum wage is lower than required to maintain the basic standard of living. The changes in the economic scenario, inflation, unemployment etc. makes it impossible to live within the minimum wage salary bracket. In order to fulfill the basic and bare minimum living standard the minimum wage rate should be linked to the cost of living that demands an increase in the minimum wage to meet the daily expenditure requirement. However, increasing the wage rate affects the overall expenditure and a feasibility analysis is required to support the new minimum level wage rate. Although it will bring many people out from the poverty line, a huge increase in the minimum wage rate will burden the employer thus raising wage standards that might hurt the minimum wage worker in terms of retention and job security. Thus the minimum wage for Georgia should be increased to at least $9 as proposed by the President in order to deal with the cost of living. In this way the minimum wage would benefit the low level employee in order to live a life with better standard. Works Cited Mankiw, N. Principles of Economics. 6th. Mason: South-Western Cengage, 2012. 117-118. Print. Richards, Jon. "Should Georgia Raise the Minimum Wage?" Peach Pundit. 31 Dec 2013: 1. Web. 22 Feb. 2014. . United States. Department of Labor. Minimum Wage Laws in the States - January 1, 2014. Northwest: 2014. Web. . Read More