Minimum Wage Raise: Hurt or Help?

By Caroline Kimbro

An overview of the minimum wage rates across the US.
(Click to enlarge image.)

As the possibility of raising the minimum wage from $7.25 to $10.10 an hour is discussed by US government officials, we hear much about the extra money it will provide for households all over America and the ways it will strengthen the economy. However, we know that most changes come with an opportunity cost and this change in wages is no exception. If businesses are required to pay their workers $2.85 more than they currently do, most will reconsider who they’re hiring. Since they have to spend extra money on employees, many businesses will want workers they think are worth this higher wage: in effect, a raise in the minimum wage will cause a shortage of jobs, particularly for the average American teenager, unskilled worker, and minority worker.

Some Thoughts on the Minimum Wage

By Loren Chue

Her author profile can be found below this article.

 

Imagine strolling in your local shopping center or mall. Your stomach growls, and try as you might to suppress the hunger pangs, your stomach chides you for not feeding it and satiating its need for food. Without further ado, you stroll into the nearest Subway, eager to purchase a five-dollar footlong. As you stand waiting, you watch a young lady prepare your lightly toasted sandwich. She is about high school age, and you think, She really should be taking a break or studying right now. The young lady hands you the sandwich and you order an extra bowl of steaming minestrone. Heading towards the cashier, this time a middle-aged man, adds up the cost and says “$7.50 please.” You hand him your credit card to swipe, and he hands you the receipt, places your food in the bag, adds a few extra napkins, a fork and a spoon, and off you go, ready to enjoy a fresh, hot meal.

 

In the Journal of Economic Issues, the liberal economist Robert Prasch defends the minimum wage. These, he writes, are the three main benefits of putting a price floor on labor: “First, it increases the level of effective demand; second, it provides an impetus for rapid technical change; and third, it equalizes bargaining power in labor markets.”

 

Here’s the breakdown:

 

Prasch asserts the minimum wage increases the level of effective demand by transferring the purchasing power over from “profits, perks and overheads to those who earn low wages.” He also writes that transferring purchasing power will “increase domestic spending.”
 

Would an Increase of Wages in Bangladesh Destroy Their Economy?

by Jaime Bravo

 Since a lot of factories in Bangladesh were destroyed, many people wondered whether an increase of wages would destroy the (fragile) economy of Bangladesh. Many people are employed every day in the sweatshops, the factories where they are being turned to slaves by an economic paradigm that does not fit for them. As I argued in my last piece, they are poor but they are not stupid. In fact, since that happened, many people started saying that the benefits from the sweatshops are incredibly great because they provide of higher wages (considering that, if they do not work in factories (with increasing-returns) they will work in the agricultural sector (with constant-returns) and because they let them to save little by little so that they can provide their children with a better education and, in the long-term, with a better future. This is the theory. But the reality isn’t so sweet. Again, economists have something to say about this issue.

What Do Bank Holidays Mean For The Economy?

by Viva Avasthi

The biggest economics-related news for the UK today has been that bank holidays are costing the British economy about £2.3 billion ($3.7 billion) per day. The Centre for Economics and Business Research (CEBR) has suggested that bank holidays should be more evenly distributed throughout the year to stop businesses "losing momentum".

There has been a very mixed response to this by the British public as I have discovered by reading some comments on the BBC site under this article:

BBC News - Bank holidays 'cost economy £19bn'

My question: is there a correlation between the success of a country and the number of bank holidays it has? If not, what could be the reasons for such a large loss for the economy?