Mar
22
Blog Post#10 (Class 16) – Cheng Dong
March 22, 2015 | Leave a Comment
Class 16: Getting People to Work – Perhaps Encourage Them With Minimum Wage?
The articles this time have presented to us a very negative perspective on our economy today. At the same time, they also presented us with a somewhat unexpected method of combating the income inequality that haunts us so today. Unlike what we believe about the economy gaining momentum in its movement towards revival, the unemployment rate is still high and the income gap is increasing. Much of this is due to the differences in quantity as well as quality of jobs before and after the recession. However, it is this unique situation that makes a prior rejected method of combating income inequality a considerable tactic.
Before we can head anywhere, it must be acknowledged that the income gap is increasing as the difficulty in finding a decent work rises. Having went through our previous readings, we are well aware of the fact that income inequality is increasing due to the top earning most of the economic growth with their capital investments. However, the issue that the bottom is earning less or not earning at all is also a grave concern in terms of income inequality. According to the USCM report, although the economy is recovering from the recession, it has not yet reach back to pre-recession level in terms of the number of jobs or the average wage for these jobs. Naturally, we can expect the middle and lower class to be earning less than before, thus contributing to the even greater income gap. On the other hand, Nelson Schwartz of The New York Times have come to tell us that shortage of jobs is not the only problem, as the number of people looking for one is dropping as well. One major reason asides from people’s disappointment of today’s job markets is the low wage paid by the jobs. Like the USCM report suggests, wage for a great number of jobs has decreased greatly compared to pre-recession levels. On the other hand, unemployed individuals are benefiting from a number of government public aids programs. It’s not hard to imagine that people would give up looking for jobs that may pay even less than the benefits they can get if they don’t work at all. However, in this particular situation, raising minimum wage, the method we have discussed and dismissed, seems to be doing great in combating income inequality.
While it seems to not benefits those not working at all, raising minimum wage can actually cause an increase in employment, thus aiding in closing the income gap. While we have previously feared that increasing minimum wage would lead to employers transfer that pressure to the customers and employees by raising prices and layoffs. However, looking at the CEPR article, that might not be entirely true as States that have raised their minimum wage did not lack behind other states in terms of growth in employments. It’s reasonable to assume that part of those employments are due to the raise in wage in prior undesirable positions, bringing people back from intentional unemployment to avoid losing benefits that trumps wages in certain jobs. While we do not expect all careers to have the same pattern in this manner, certain fields of employment do require minimum wage to keep their employees. A great representative of such fields is the restaurant service industry, which has a notoriously low minimum wage for the waiters who bring food to our tables. I wouldn’t be surprised if they find receiving benefits to make their lives easier than working they job as a waiter.
Now, although the data from the CEPR article supports the idea that raising minimum wage can increase employments, it is still just a general observation. There is the possibility that the increase in employment is the normal trend of the economic development of those states and not the result of raising minimum wage. In fact, the increase in employment might have been even higher had the minimum wage not been raised. In order to solve these doubts, questions must be brought up regarding the details of these states’ economy. How has past year, when minimum wage was not raised, compare to present year in terms of increase in employment? How was the increase in employment divided among different fields of career? How has the total wage payout changed due to the increase in minimum wage? There must be more information before one can definitively say that increase in minimum wage can actually help in recovering employment.
Despite our belief in the betterment of our economy after the long dreaded recession, unemployment still looms over our lives and contributes to the notorious income inequality in our society. In these abnormal times, abnormal measures could bring effects that are once conceived to be improbable. In our case, raising minimum wage today could lead to increase employment, instead of decreasing employment as we once expected, and thus aiding in closing the income gap. However, before we can acquire the full details as to the effects of the raising minimum wage, we are best to see it as a good hope rather than a definite solution.
