Kyle Tregilgas
Composition 1022-14
Brian Lewis
One thing that really bothers me when I hear other people suggest that we need to increase the minimum wage is that most the people I have talked never stop to consider where that money comes from and who is actually paying for it.
The fact is when there is a mandatory wage increase across the board business's have a significant increase in their overhead costs and they are going pass that cost on one way or another. Most business's are not going to take the cost increase out of their profits, especially when their competitors will see the same cost increases.
Here is the the real problem. When a company has a increase in their fixed overhead costs they are going to make one of two choices, increase the the cost of the goods and services they sell or decrease employees and employee benefits.
So does raising the minimum wage actually hurt consumers and the economy more than it will help the employee who receives the pay increase? well, If you consider the the consequences of businesses passing on their increased costs by increasing the prices of goods and services they sell to consumers or cutting benefits and employees, the answer appears to be yes.
Consider this, if everyone who makes the same amount of money as you suddenly gets a pay increase of 5 percent do you actually have any increase in purchasing power? Unfortunately, the answer is no and here's why. There are not any additional goods and services being produced, only more money in the system chasing the same amount of goods. This of course increases demand which in turn increases prices. In this case the employee's pay increase is wiped out by inflation.
The other option businesses have is to decrease employees and benefits. This option has significant impacts as well.
If an employee's benefits are cut (like health insurance, 401k contributions and tuition reimbursement) this can add several thousand dollars in out of pocket expenses for the employee or prevent them from adequately saving for their retirement.
And if you think reducing the number of employee's or not hiring new ones is a better solution (as long as it's not your job), it's not. If companies don't hire the economy can't grow and if companies cut employee's the economy can actually shrink which leads to high unemployment rates and a stagnant economy. Very similar to what we are seeing right now.
It is worth noting that smaller businesses, those with an annual dollar volume of less than $500,000.00, are given some leniency when it comes to minimum wage. These smaller companies can pay as little as $5.25 per hour under the federal minimum wage law. Aslo, any company may pay a person under 20 years old $4.90 per hour for up to a 90 day training period.
Works Cites
Minnesota Department of Labor and Industry, "How federal minimum wage increase affects Minnesota Businesses." doli.state.mn.us. Minnesota Department of Labor and Industry, n.d. web. 4 February 2009.
Composition 1022-14
Brian Lewis
One thing that really bothers me when I hear other people suggest that we need to increase the minimum wage is that most the people I have talked never stop to consider where that money comes from and who is actually paying for it.
The fact is when there is a mandatory wage increase across the board business's have a significant increase in their overhead costs and they are going pass that cost on one way or another. Most business's are not going to take the cost increase out of their profits, especially when their competitors will see the same cost increases.
Here is the the real problem. When a company has a increase in their fixed overhead costs they are going to make one of two choices, increase the the cost of the goods and services they sell or decrease employees and employee benefits.
So does raising the minimum wage actually hurt consumers and the economy more than it will help the employee who receives the pay increase? well, If you consider the the consequences of businesses passing on their increased costs by increasing the prices of goods and services they sell to consumers or cutting benefits and employees, the answer appears to be yes.
Consider this, if everyone who makes the same amount of money as you suddenly gets a pay increase of 5 percent do you actually have any increase in purchasing power? Unfortunately, the answer is no and here's why. There are not any additional goods and services being produced, only more money in the system chasing the same amount of goods. This of course increases demand which in turn increases prices. In this case the employee's pay increase is wiped out by inflation.
The other option businesses have is to decrease employees and benefits. This option has significant impacts as well.
If an employee's benefits are cut (like health insurance, 401k contributions and tuition reimbursement) this can add several thousand dollars in out of pocket expenses for the employee or prevent them from adequately saving for their retirement.
And if you think reducing the number of employee's or not hiring new ones is a better solution (as long as it's not your job), it's not. If companies don't hire the economy can't grow and if companies cut employee's the economy can actually shrink which leads to high unemployment rates and a stagnant economy. Very similar to what we are seeing right now.
It is worth noting that smaller businesses, those with an annual dollar volume of less than $500,000.00, are given some leniency when it comes to minimum wage. These smaller companies can pay as little as $5.25 per hour under the federal minimum wage law. Aslo, any company may pay a person under 20 years old $4.90 per hour for up to a 90 day training period.
Works Cites
Minnesota Department of Labor and Industry, "How federal minimum wage increase affects Minnesota Businesses." doli.state.mn.us. Minnesota Department of Labor and Industry, n.d. web. 4 February 2009.
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