Among the many ways of reducing income inequality is through the minimum wage. The minimum wage can be defined as the minimum amount of financial compensation or remuneration that employers should pay the wage earners for work performed in the course of a specified period. Additionally, this remuneration cannot be reduced either through individual contract or collective agreement. Ernie Tedeschi of New York Times provide credible data that Americans are witnessing significant increase in minimum wage regarded as the highest throughout their history.
The minimum wage set by the federal government almost a decade rose to $7.25 an hour which has failed to budge ever for a long time. The Americans residing in the twenty one states including Arizona, California, and Florida where there is binding of the federal minimum wage have noticed that as a result of inflation, the minimum wage has lost almost a quarter of its purchasing power (Tedeschi, 2019). However, many workers and employers in other states are earning above the wages which were set in 2009. This can be attributed to state capitols and city halls playing more active roles in setting the minimum wages. The District of Columbia plus twenty nine other states are experiencing above minimum wages set by the federal governments. In Massachusetts and Washington State for example, the minimum wage is $12 an hour. In some cities, there is a recorded surge in the minimum wage figures, for example New York has its minimum wage at $15 an hour whereas SeaTac has its minimum wage set at $16 an hour (Tedeschi, 2019). If averaged, that is the federal, state as well as the local wage laws, there would be a significant rise in the minimum wage from that set by the federal government, all averaging at $11.80 for every hour. If adjusted for inflation, this could be highest minimum wage ever recorded in the history of America.
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The minimum wage has not only risen above inflation a few year back but also outpaced the typical wages. From the Kaitz index, there is evidence which compares the median overall wages and the minimum wages. Additionally, sufficient evidence indicate that the federal minimum wages affects a small population of the minimum wage workers. The minimum wage regulations above the one set by federal government used to be the exception (Tedeschi, 2019). For example, the year 1998 saw about one million minimum wage laborers in jurisdictions with a minimum exceeding that of the federal government. Still, more than half of these workers resided in states where the federal minimum was applicable.
Currently, about 89 percent of the America’s seven million wage employees earn a minimum greater than the set $7.25 an hour. About five years back, few of these workers lived in areas with different local minimum wages (Tedeschi, 2019). A major consequence of this is increasing regional variation. The American minimum wages find their basis from the state of New York minimum wage of $13.73 an hour which translates into about sixty two percent of the state’s median general wage.
With soaring minimum wages across America, there are many questions being asked about how it has affected the American workers. In the bottom third of wage distribution, the minimum wage has increased for a record of 2.3 percent every year for the past three years signaling a boost in the wage growth at the bottom (Tedeschi, 2019). Such increases make a difference for the workers who reside and can find employment in those places affected by the wage increase.
In economics, there are arguments made that all public policies have trade-offs, including the minimum wage policy. As such, there are tons of information in economic materials that reason of employers being capable of cutting jobs or hours for concerns of low-wage work if needed to set the price of labor superior to that level consistent with market supply and demand. However, this remain a contentious issue in economic debates because the real world is riddled with many factors that makes it difficult to test such kind of arguments.
From the above illustrations, it is relatively good if minimum wages are increased to help curb the ever increasing gap of income inequality. Similarly, factors such as inflation should warrant increase in minimum wage so that consumers can have more disposable income to spend more on basic needs. However, the tightness of the labor markets makes it hard to appreciate the recent increases in the minimum wage. Arguably, some people believe that the minimum wage only bite if they surpass some levels. Others concerns arise that the employers may be insensitive to the increased minimum wages as a result of some reactions such as cutting down employee benefits, a practice which is hardly captured by the economic data. Again, the employers might have grown insensitive to the minimum wage increases because of the decline in national business competition as well as the labor bargaining power.
References
Tedeschi, E. (2019). Americans Are Seeing Highest Minimum Wage in History (Without Federal Help). The Upshot, The New York Times . Retrieved from https://www.nytimes.com/2019/04/24/upshot/why-america-may-already-have-its-highest-minimum-wage.html
