Running head: minimum wage in america 1

Minimum Wage in America

Askia Buggs

University of Texas at El Paso

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Abstract

This paper will mainly focus on the minimum wage in America. It will define the term minimum

wage and explain how the law is formulated and how it works. It also considers other researches

done previously on minimum wage and the results found in the researches. It focuses on various

research questions based on minimum wage. It answers questions mostly asked like where the

law is applicable and where it is exempted and the effects of raising the minimum wage. The

main goal is to make the reader understand clearly how the local, state and federal minimum

wage law in America works. The final phase concentrates on the challenges faced by the

governments when implementing the law and what should be done to make the law effective as it

is supposed to be.
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In the United States due to the need of improving the living standards of its citizens, the

minimum wage law was formulated, and it has been amended several times. Minimum wage is

known as the minimum amount an employer is mandated to remunerate his or her employees for

the work done over a period mostly it is counted in hours. This set minimum wage cannot be

reduced in any situation even by collective agreement between the employee and the employer.

The main aim of this law's amendment is to protect workers from unfair pay from employers

who are greedy to make more profits. The minimum wage law can also be used as a policy to

reduce inequality by promoting equal remuneration rights for equal work value and reduce

poverty. Minimum wage provisions are found in the constitution under the Fair Labor Standards

Act (FLSA). Though it helps even in improving the economy by facilitation consumption

increase in the US, it has faced many challenges as some employers do not follow it instead they

threaten employees hence making them afraid to complain. According to various surveys done

minimum wage law has helped many people have a better life and be capable of providing to

their families. The United States local, state and federal governments should set a strict system

that ensures no employee is paid less than the minimum wage. Some employees like those who

receive tips as a form of payment and salespeople who receive commission are exempted from

the minimum wage.

The United States laws are set by the governments starting with the local, state and

federal governments. Just like other laws, the minimum wage law is set by a network of local,

federal and state governments. According to this law, employers are required to pay their

employees the highest minimum wage according to the local, state or federal law. The current

minimum wage mandated in the United States as of July 2016 is $7.25 per hour. This law applies

to almost 90% of all nations in the world with all having a kind of wage legislation. The work of
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this law is to prohibit employers from paying employees less than the mandated minimum wage.

Since it was the last reset, the law still requires one to pay employees $7.25 per hour with other

states raising their minimum wage (Dube, 961). The law has some exempts to some types of

labor like employees under the age of twenty for the first ninety work days may be paid $4.25 an

hour unless the state has a higher minimum wage which should be followed. Employees who

receive tips as a form of payment are also exempted in that they can be paid $2.13 per hour, but

this depends on whether the total earnings equals the set minimum wage. Other employees are

also exempted from this law, for instance, individuals who are the spouse, parents, or child of the

employer and outside salespersons. Minimum wage provisions are found in the constitution

under the FLSA. Because the local, state and federal governments have minimum wages, an

employee is entitled to the minimum wage that is higher. The FLSA does not give procedures for

wage payment or collection of wages or commissions in excess, but this is covered in states laws

where some states have laws under which this claims can be filed. The federal minimum wage

law is imposed and implemented by the Department of Labors Wage and Hour Division (Hirsch

et al. 221). The employer is obligated to follow the minimum wage, and under any condition, it

cannot be waived not even by any agreement with the employee. Remedial legislations

formulated to protect the employee cannot be violated either by any agreement between the

employee and employer.

The federal minimum wage in the United States has remained $7.25 per hour for several

years now making people question if it is the right decision to keep it that way or it should be

increased to $15, $12 or $10.10 according to various suggestions by politicians. According to a

mail survey done by the University of New Hampshire Survey Center to determine Employment

Policies Institute (EPI) economists response on the issue of raising the minimum wage to $15,
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most of them did not agree. Among the five hundred and fifty-five economists who received the

survey email only 30% responded. The survey asked the economists the effects raising the

minimum wage to $15.00 per hour will have especially on the skill level of entry-level jobs, and

more than 80% responded that employers would employ employees with greater skills at entry-

level positions mostly to ensure they have value for their money. Mostly this made almost three-

quarters of them oppose the federal minimum wage of $15.00 per hour. The other major

economic question focused on small businesses with less than fifty workers and more than 65%

of the economists claimed that a $15.00 per hour minimum wage would make it even harder for

small business to remain in business (Lee et al. 743). More than half of the responses revealed

that raising the minimum wage will have negative effects on the number of employment

opportunities available, adult employment levels and youth employment levels.

To whom does the minimum wage apply?

The minimum wage law of America applies to almost all employees with very few

employees being exempted. Starting with government employees whether employees of local,

state or federal government agencies the minimum wage law applies to them together with

schools, hospitals, and domestic workers. It also applies to smaller firms employees when they

are engaged in commercial goods production or interstate commerce, for instance, small firm

transportation or communication workers or workers who use interstate communications

frequently like telephones and mails. The law also applies to all employees like janitors, guards

and maintenance employees because their responsibilities are directly important and closely

related to interstate activities (Hirsch et al. 230). Lastly, the law applies to workers of enterprises

with the capability of generating and annual gross sales volume of at least $500,000. Although

the minimum wage law applies to most employees, it does not apply to some of them because it
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has various exemptions. The exemptions are interpreted according to the employer declaring

them. The burden of applying for an actual exemption rest is the employer's and not the

responsibility of an employee. Although it is the responsibility of an employer to apply for

exemptions, the exact terms and conditions of the exemption should be closely checked by both

the employers and the employees considering the employees' actual responsibilities. Exemptions

are also found in overtime pay provisions, child labor provisions, and minimum wage provisions.

Some employees are exempted from these provisions of the Fair Labor Standards Act (FLSA).

Small Farms employees are exempt from both the overtime and minimum wage provisions.

Other employees such as those who work in service or retail establishments and are paid on

commission are exempted from overtime provisions but only when the average pay per hour

worked is at least more or equal to one and one-half times the minimum wage, and more than

half the earnings are from the commission (Sabia et al. 366). Employees whose responsibilities

affect the operation safety of transportation machinery in foreign commerce or interstate

transportation of passengers or property are exempted from overtime pay provisions for instance

loaders, mechanics, drivers and driver's helpers working for a motor carrier.

Effects of increasing the minimum wage1

When the United States raised its minimum wage, it faced various effects. The effects

experienced due to raising the minimum wage are controversial depending on the situation.

Increasing the minimum wage can affect future and current levels of income inequality,

economic growth, employment, poverty and prices of goods and services. Increasing minimum

wage has an effect on the economic growth, but it depends on whether the income transferred to

employees from employers result in increased average spending levels (Dube, 963). Higher

income owners mostly employees do not spend more instead they save more, but low-income
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earners spend more and save less hence when income is transferred from high-income earners to

low-income earners it is expected that there will be higher demand hence the total consumption

rate will increase. In economics marginal propensity to consume is defined as the act of a

consumer spending their next dollar and its increase can also increase employment. Increasing

the minimum wage also affects the federal budget deficit in that in short-term it can reduce the

budget deficit, but in long-term it may increase the budget deficit. This deficit may be offset by

various government benefits paid when higher income employees receive less government

transfer payments, and on the revenue side, tax payment would be high on some workers than

others. Increasing minimum wage affects prices of services and commodities in that it first

increases the labor cost whereby other factors being constant employers may raise their prices or

accepts less profit or both. In the occasion where they raise their prices, consumers demand to

reduce following the economic law of price and demand or they substitute the commodities with

others which have the value of money in most cases imported commodities. This effect also

applies to job creation and employment in that when prices of something increases it results to

decrease in quantity demanded. When labor prices increase labor demand decrease hence when

employers believe that employees are not generating value more than or equal to their minimum

wage they will not be retained or hired. Raising the minimum wage improves the quality of job

because it raises the living standards and may adopt things like health insurance coverage.

Increasing the minimum wage reduces poverty and enables many people to shift from below

poverty income threshold to above poverty income threshold (MaCurdy, 512). It also reduces

crime because most people who are forced into the crime world are having a better income hence

they will not be forced to commit crimes. Increasing minimum wage helps mostly the low-

income earners to improve their living, but it may have negative effects on the economy.
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Is minimum wage law effective, what challenges face implementing the law? Minimum

wage law is valid in the United States but, at the moment faces challenges upon its

implementation. According to economists, they claim unemployment crisis jets in especially

from those bracketed in the category of low wage. Their argument being that minimum wage

creates a base that labor out of the market priced as cheap reduces the accessibility of

occupations that pay very low salary. According to Daniel Mitchell poor skilled laborers yet earn

higher minimum wages become ruinous either to the entire organization or state (Gillikin, Jason).

To prove his point how that becomes damaging, he adds further with an illustration of how

youths play the victim. Whereby for instance, at a workplace where the employer requires an

individual to employ for an odd task. He opts to pay him/her about $2 an hour but ends not hiring

this other person who can do the job effectively at a value of $7 an hour thereof ends

unemployed, but the fact remains low waged laborers stick (Gillikin, Jason). With Minimum

Wage Law, training opportunities to its employees reduce. Liebler's argument, notes that with

Minimum Wage Law that means low income thereof low skilled personnel to work and perform

better as excellent chances to be trained are removed. He notes that what this Minimum Wage

law does to its employees is that it cuts the laborers' employment ranks making it difficult for

them to get well earning jobs as they remain low skilled. Also, he points that if employees stay in

the same low wage level, then that just means any task is subjected to already those who have the

ability to do it resulting in no training to develop those that do not know. Therefore, employees in

the low wage category can never have the opportunity to advance and get to greater echelons.

What should be done to make the law effective? Minimum Wage Law to be certain,

effective policies need and need not be implemented. Since formerly it was implemented by

policy, then it can still change by policy. To have a change, those in government should at least
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incline less of the bargaining power to achieve a low or at least moderate wage for its employees

(Lawrence, and Ross). To attain that aim, two different policies should be enforced; initially, they

can first recognize elements that lead to unemployment issues and those that suffocate growth of

wages over the years. Also, examine factors that drive the economy financially as well as

extravagant pay rise on those on managerial posts. Besides, the inaction of budgetary and

monetary policy that helps remit wage increase as it categorizes full employment enhancing the

labor market as what employers need to do is create a rise in salaries and keep laborers they

require for a certain task. The second distinctive policy to address would be; following the

business exercises whereby the relevant policymakers would check as to why labor merits have

deteriorated, examine the job market establishments if weakened as particularly that is what

reduces an employee or team power to negotiate for a wage rise(Lawrence, and Ross). This Law

can be effective when the Minimum Wage on workers rises, and this is achieved from

policymakers putting an end to compulsory adjudication. As they give leave out sheets on sick

laborers, submitting contracts in parastatal firms that cohere to laws such as health or wages and

safety, dissolving racism or gender bias and also dealing with abuses at work arising from wage

thievery. There are also need nots policies not to enact as decision makers so as to grow the

wages or rather to make the Law useful and they are inclusive of; tax slash, and increased

completion at college levels. According to Ariel Edwards-Levy of the Huffington post, most

Americans employees are not satisfied with the current minimum wage mostly because it was

raised some years back and they feel that it should be raised again. The following table shows

how Americans support and oppose increasing the minimum wage and with which percentage.

The green bars represent those who support increasing the minimum wage while the red bars
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represent those who oppose.

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To sum up, the current minimum wage mandated in the United States as of July 2016 is

$7.25 per hour. Minimum wage provisions are found in the constitution under the Fair Labor

Standards Act (FLSA). Because the local, state and federal governments have minimum wages,

an employee is entitled to the minimum wage that is higher. Although it is the responsibility of

an employer to apply for exemptions, the exact terms and conditions of the exemption should be

closely checked by both the employers and the employees considering the employees' actual

responsibilities. The law does not apply to some of them because it has various exemptions.

Exemptions are also found in overtime pay provisions, child labor provisions, and minimum

wage provisions. When labor prices increase labor demand decrease hence when employers
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believe that employees are not generating value more than or equal to their minimum wage they

will not be retained or hired. Raising the minimum wage improves the quality of job because it

raises the living standards and may adopt things like health insurance coverage. The minimum

wage in America must be increased because even though some states will increase theirs and

employers will be entitled to follow the highest minimum wage others will not hence they need

the federal minimum wage law. Though at times raising the minimum wage may have negative

effects in the long-run it helps many people to live a better life and provide a better life for their

families, it also reduces crime rates. The minimum wage should be increased to about $10.10 to

$12.00 because the current minimum wage favored citizens back in the days and not currently.

References

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Wage". Employment Policies Institute, 2017, https://www.epionline.org/studies/survey-

of-us-economists-on-a-15-federal-minimum-wage/.
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"Raising The Minimum Wage Is A Really, Really Popular Idea". The Huffington Post, 2017,

http://www.huffingtonpost.com/entry/minimum-wage-

poll_us_570ead92e4b08a2d32b8e671.

Benassi, Chiara. The implementation of the minimum wage: Challenges and creative solutions.

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Dube, Arindrajit, T. William Lester, and Michael Reich. "Minimum wage effects across state

borders: Estimates using contiguous counties." The review of economics and statistics

92.4 (2010): 945-964.

Gillikin, Jason. "Problems with Minimum Wage." Smallbusiness.Chron.Com, 2017,

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Hirsch, Barry T., Bruce E. Kaufman, and Tetyana Zelenska. "Minimum wage channels of

adjustment." Industrial Relations: A Journal of Economy and Society 54.2 (2015): 199-

239.

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That Don't." Stetson L. Rev. 45 (2015): 43.

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