National Minimum Wage Elaboration - Essay Example

The “living wage movement” owes its genesis to the failed attempts by the legislative to effect greater parity between minimum wage and a living wage. With both the Democrats and the Republicans united on the issue of an increase in the minimum wage, a price hike is predicted shortly. The current price of minimum wage is likely to rise from $5.15 to $ 6.15 in a phased manner spread throughout 2 to 3 years.

There has always been a clash of interest between organized labor groups and the business community. Organized labor group call for a more competitive hike in the minimum wage so that the workers enjoy a marked advancement in their standard of living. The business community is apprehensive about the economic consequences of rising the minimum wage. Small business fears they would face a crunch forcing them to shut down their business or discourage new entrepreneurs due to the rising cost of labor. Most small business organizations are short of finance and hence if the cost of hiring labor is more than the profit generated then the costs are cut and expenses covered by making less recruitment. The business community at large predicts that the increases in the cost of the minimum wage would force them to lay off people and discourage them from making new recruitments thus increasing the rate of unemployment, especially for unskilled laborers. Another consequence of the rising cost of labor is that business organizations start looking for fresh terrain offshore for cheap labor. Thus the employment opportunity created at home is not available to the people. Ron Birb, chief economist of Employment Policy Foundation an NGO (non-governmental organization) is of the view that a higher minimum wage is detrimental to the interest of unskilled workers and stuns entrepreneurship and expansion of business.

New research on the effect of an increase in the minimum wage has revealed startlingly distinct findings. Jerome Levy Economics Institute at Bard College carried out a study in 1997 which revealed that a wage rise from $4.75 to $5.15 influenced the hiring choice of only 6.2% of the small business which was part of the survey. In 1998, another survey revealed that 84.3% of the business houses studied claimed that a minimum wage of $6 will not influence their hiring decision. Of the minimal percentage who said their hiring decision would be affected also claimed that working employees would not be laid off. Oren M Levin, the team leader of the survey elucidated that most people who oppose an enhancement in minimum wage price reasoned that such a hike would result in more layoffs (C. J. Prince, Pay Up, 2001). Such new studies have been lapped up promptly by political circles for vote bank support and interest group benefit. In Chicago, the enhancement in the standard of living of the workers due to the rise in the minimum wage has been quite apparent. Not only were the workers benefitted business organizations enjoyed the benefits. With the increase in the minimum wage to $4 above the government rates a company observed that the rate of turnover rates increased dramatically. When the minimum wage rates are higher a business organization hires more skilled workers, requiring less training. With better wages, the incentive to work efficiently and stick to an organization is more. The Transportation Security Administration and various private sector companies like In-Out Burger etc reported similar improvements (James Cicarelli, Since1968,2003). At the same time, however, an increase in the minimum wage may shift the attention of organizations toward hiring skilled workers. The unskilled worker is placed in a disadvantaged position in such a scenario. The effect of the price rise of minimum wage is a crucial subject with diverse ends which has to be examined meticulously (Benjamin Zycher, MEIOMWI, 1995). Read More