Minimum Wage and Unemployment Rate †A Direct Relationship Essay

In any labor market, free or regulated, in that location is friction and rigidity that result in labor issues. With 11 million the great unwashed unemployed, and millions more discourage or underemployed, in that location is justification to believe that these high population levels represent a glitch in the American labor market (1). These basic statistics, coupled with the elementary economic theory of supply and pauperism, examine that stripped-down take regulation has not only proven to be unsuccessful, notwithstanding should be eliminated immediately.Although mandatory lucre levels may be problematic in our coeval labor market, the theory supporting a stripped-down wage dates back to over three centuries ago. The earliest evidence of a mandatory minimum wage could be found in New Zealand when in 1894 there was an effort to extinguish sweatshop labor. a the like during this metre, Australia made amendments to the Factories Act which created a wage expense appal i n six industries that were considered to flummox pocket-sized paying wages. Although this amendment began as an experiment, within a few years additional amendments were created to expand minimum wage to over 150 varied industries (2).It took until the early 1900s for the minimum wage model to appear in the United States. In 1912, Massachusetts set up a commission not to demand minimum wages, scarcely to recommend them especially for women and children. Within eight years, 13 US states and capital letter DC implement their own compulsory minimum wage laws (3). Due to challenges from the Supreme Court during the Lochner Era a time where the Supreme Court exercised its power to protect economic liberty and private contracts it took until 1938 for federal minimum wage laws to manifest in the United States.Presented under the Fair Labor Standards Act under the scope of the barter Clause, the Supreme Court ruled that Congress had the power to regulate employment. As a result, t he first ever federal minimum wage entered the market at 25 cents an hour (4). Today we have a federal minimum wage of $7.25/hour and regular(a) higher in nigh states like Washington where the minimum wage is over $9/hour.Aside from the role minimum wage laws play in our current market, theyve also made prominent news headlines and been in the minds of many an another(prenominal)(prenominal) laborers as of recently. Many of these headlines break in a desire by workers and politicians alike to raise the minimum wage. Organized protests by workers in the luxuriant food industry have assembled in the streets of major cities to bring to attention not only their demand for a much higher minimum wage, but for union representation as well. Additionally politicians like Barack Obama and Seattle Mayor Mike McGinn have spoken publicly about their desire for an increased minimum wage. fleck the President has put pressure on Congress to legislate a $9/hour minimum wage, Mayor McGinn has expressed his support for a $15/hour minimum wage by his various(prenominal) legislators (5).Aside from the strong political appeal that may encourage politicians to propose minimum wage increases, on the surface this type of legislation seems like a well-intentioned effort to raise the standard of life history of batch working for relatively low wages. This is not only because people naturally desire repair things for themselves, but it also seems like a productive way to align wages with levels of inflation that the national Reserve is primarily responsible for (6).To make minimum wage theory even more confusing, there have been multiple studies on the issue only to garner completely opposite results. David Neumark, an economics prof at UCI and William Washer, an economist on the board of governors at the Federal Reserve wrote a descriptive one hundred fifty-five page monograph that elaborately detailed the negative effects that minimum wage laws created.Conversely, David Ca rd an economics prof at UCB and Alan Krueger, a professor at Princeton University, published a highly renowned study that cogitate minimum wage laws would only cause minimal job loss and in some instances could even raise employment levels (7). However, when studying economic phenomena mixed results be completely common due to the nonstarter to meet the cetaris paribus condition, which stresses the concept of keeping variables constant. Not surprisingly, there were very few constant variables between these cardinal studies. So rather than fill this essay with the observations of others, I plan to mainly use deductive reason to discuss the logical consistency of my argument. Because minimum wage laws are not only self-defeating but also make society poorer, it is in everyones best interest, especially those the law is intended to help, to remove minimum wage laws immediately.In rudimentary economic studies, we learn about the affects supply and demand have on market clearing pr ices and that where supply meets demand is price equilibrium. We also learn that when prices are haphazardly set above equilibrium, the result is a surplus. Wage labor is no different, and when analyzing this data, the surplus can be expressed as unemployment.These surpluses (unemployment) result when the productivity of a laborer is not high enough to mug the new minimum wage. Now an economic burden to the company, the employer will have no choice but to terminate the employee(s) in order to remain profitable in their endeavors. Because these compulsory created economic burdens will in the main be people already earning relatively lower wages, wage price floors actually hurt the people they are intended to help. Even if one was to claim that the terminations resulting in raising the minimum wage were offshoot by the new people making higher nominal wages, this person would be committing an arbitrary value judgment.Additionally, minimum wage laws have a dampening effect on inne r city early days (8). After spending time in subpar public schooling, many underprivileged adolescents are forced to crook to the streets instead of taking a low paying position where he would be able to arise skills on the job. Rather than gain working experience, he is more prone to a perpetual cycle per second of poverty and violence. When viewed from a more macro approach, there are even worse social ramifications. Unemployment is universally agreed upon as a bad thing.This is because the negative effects have no offsetting benefits, rather they are considered a dead loss. When unemployment levels rise, people tend to crave acts of protectionism, which is are strives to restrict the immigration process and localize imports from competing countries. Not only can these actions lead to retaliatory actions from other countries, but can also mob the influx of cheaper goods, which will directly hurt the unemployed (9). Not only will unemployment lower substance national output , but it also creates a demand for costly federal and state services such as the unemployment program.Furthermore, the logic behind the minimum wage legislation seems to contain not only many dissenting opinions on what the nominal wage should be, but many faults in logic as well. devour to the cent, there are thousands of people who all support the minimum wage but at different amounts. Although most main stream public figures seem to restrain a wage price floor from exceeding $20/hour, wouldnt consistent logic prevail for compulsory wages of at to the lowest degree $100/hour or even $1,000/hour? Clearly, this is absurd. Rather than having economists design the economy, evidence prevails that it would be fail for people to decide respective wage levels on their own. While it may be true that domesticate rises in the minimum wage may not lead to substantial changes in the rate of unemployment, this is scarcely why these laws are self-defeating. This price floor only affects a small sect of the economy, making some of it unemployed.When laborers compete for a job, they have two tools. On one hand is productivity and ingenuity. On the other hand is the wage at wish they are willing to work for. If a relatively fruitless worker wants to compete with a highly productive worker, then he or she must naturally accept a lower wage. In doing this, the worker gains a form of payment through friendship and information that can be taken with them throughout life. Denying this ind ividual the right to do so, with arbitrary government price floors, removes his or her ability to compete and to find employment. Not only will this disarm the very people the laws were intended to help, but it also blocks a person from a basic right to work at whatever wage he or she chooses to do so at.Through the use of deductive reasoning, it is sort of clear that although well intentioned, minimum wage laws have created a disturbing effect on our contemporary labor market and have h ad negative effects on the people they were designed to help. It should come as no surprise then that the urbanareas of our nation experience the highest levels of unemployment.Works Cited1) Employment Status of Displaced Workers The editor programs Desk U.S. Bureau of Labor Statistics. U.S. Bureau of Labor Statistics. U.S. Bureau of Labor Statistics, 1 Sept. 2013. Web. 21 Oct. 2013. 2) register of the Minimum Wage. Wikipedia. Wikimedia Foundation, 08 Feb. 2013. Web. 21 Oct. 2013. 3) Minimum Wage in the United States. Wikipedia. Wikimedia Foundation, 21 Oct. 2013. Web. 21 Oct. 2013. 4) Lochner Era. LII. Cornell University Law School, n.d. Web. 21 Oct. 2013. 5) Associated Press. Seattle Mayor Would Support Minimum Wage above $15. USA Today. Gannett, 9 Oct. 2013. Web. 21 Oct. 2013. 6) Casey, Chris. Killing the Currency. Ludwig Von Mises Institute, 27 May 203. Web. 21 Oct. 2013. 7) MacKenzie, D.W. The Ludwig Von Mises Institute. Minimum Wage Laws Economics versus Ideology. N.p., 14 June 2007. Web. 21 Oct. 2013. 8) Caldwell, Roger. Inner City blacken Male Unemployment At 50 Percent. West Orlando News Online 2013 Central Florida News, Info, Sports. N.p., 15 Nov. 2009. Web. 21 Oct. 2013. 9) The Cost Of Unemployment To The Economy. Investopedia. N.p., 9 Aug. 2011. Web. 21 Oct. 2013.