Critical Thinking Paper: Minimum Wage

Camille Wilson

Green Group

May 15th, 2017

 Congress must raise the federal minimum wage by amending the Fair Labor Standard

Act in order to increase economic growth, reduce government welfare spending, and spur

job growth.

In 1938, the federal government established the minimum wage using the Fair Labor

Standards Act, which also marked the first time that employers were legally required to pay

workers overtime for certain jobs (Sessions). The minimum wage started at an estimated

twenty-five cents in unadjusted and un-inflated American currency, which was estimated to

be $3.40 in modern American currency. Since then, the Fair Labor Standard Act has been

amended on many occasions and the federal minimum wage has increased to $7.25 in

modern inflated currency and has remained at $7.25 since 2009 (qtd. Desilver: minimum

wage). The federal minimum wage is given to workers who are considered to be nonexempt

employees; individuals who work a job that is sanctioned and governed under the Fair

Labor Standard Act (FLSA Home Page). And it is nonexempt workers who are entitled to

additional [overtime] pay if they exceed the Fair Labor Standard Acts forty-hour

workweek. The minimum wages serves as a source of income for approximately 1.92% of

American hourly paid workers (qtd. Desilver: minimum wage). Although the minimum

wage helps to support individuals and families across the country, one factor complicating

the minimum-wage increase is that, the cost of living varies widely depending on what state

one may be located in (qtd. Desilver: Cost of Living). The federal minimum wage is a

precedent that state governments and businesses use to calculate how much their state

minimum wage should be (also taking into account state cost of living). Once the federal

minimum wage is increased, state governments will increase minimum wage pay to comply

with Congress fair labor standards and state dependent cost of living. Through this, more
workers will become monetarily stable and independent allowing an increase in economic

growth, reduced government welfare spending, and spurred job growth.

An increase in the United States minimum wage will increase American economic

growth and activity. The United States is ranked seventeenth regarding worldwide economic

competition. Some believe that raising the minimum wage will cause inflation and the cost

of economic consumer goods to increase. However this claim can be refuted through

multiple sources of credible evidence. Because the federal minimum wage is not indexed for

inflation, its purchasing power (the number of goods that can be bought with a unit of

currency) has dropped considerably (procon.org). This means that because the federal

minimum wage has not kept up with inflation, and raising the minimum wage cannot cause

any sort of inflation regarding the cost of economic consumer goods. Others who are also

opposed to raising the minimum wage may argue more economic profit will be lost, and not

gained if the minimum wage is increased. The case study briefing of David Cooper and

Douglas Hall regarding how raising the minimum wage impacts the economic system can

also refute this claim. Raising the minimum wage puts more money in the pockets of

working families when they need it most (Cooper and Hall). The more money earned

through work, individuals and families have more money to spend on consumer good,

regardless of price. In addition, several landmark studies have concluded that increasing

minimum wages consumer spending increased in years following the wage increase (qtd

AFL-CIO). This increased amount in consumer spending brings in more money to the

economy and allows the American economic system to thrive. Raising the minimum wage is

essential in order to increase economic growth.

 An increase in the minimum wage will reduce government welfare spending. Some

people may argue that putting money towards raising the minimum wage in an effort to

reduce government welfare spending is a waste of government resources. However, in a

recent case study report on Balancing Paychecks and Public Assistance: How Higher Wages

Would Strengthen What Government Can Do case study conductor, David cooper found this

claim to be false. From his study it was concluded that, raising the federal minimum wage

to $12 per hour by 2020 would reduce public assistance expenditures by $17 billion

annually (Raising Minimum Wage Would Reduce Public Assistance Spending). Cooper

expresses the direct effect and positive correlation between the increase of the minimum

wage and reduced amount of government welfare spending. Through this article a reader

can come to understand that not only will pre-existing minimum wage workers benefit from

a higher pay, but the government would benefit as well. As the amount of jobs attained by

workers increases (as it will not stay the same), the government will adjust to the increased

amount of workers that they need to pay. By raising the minimum wage pay, those people

who are on government assistance, but still working a job that has minimum wage pay will

be able to better support themselves and their families. The added income will serve as a

way to access everyday necessities. The government would then have less Americans to

support, (because they now have a heavier flow of income) and would be able to focus on

and fund more issue that may also require monetary assistance. According to the Cato

Institute, the federal government spends $668 billion dollars per year on 126 different

welfare programs (qtd. Konczal; No, we dont spend $1 trillion on welfare each year).

From this, a reader can see how much the government gives to help fund welfare programs.

If the minimum wage were increased, government spending would have to be cut
significantly. The significant spending cuts would allow the government and franchises to

invest their money in other areas where monetary aid is needed. With a steady flow of

income and profit, companies wont have to fire workers simply because they cannot pay

them. Raising the minimum wage can significantly reduce government welfare spending.

Some might argue that increasing the minimum wage has no effect on spurred job

growth. However, there is sufficient evidence to refute this argument and prove that

increasing the minimum wage will help to provide more jobs, and therefore, increase job

growth. [1] Economists from the Federal Reserve Bank of Chicago predicted that a $1.75

rise in the federal minimum wage would increase aggregate household spending by $48

billion the following year, thus boosting GDP and leading to job growth (procon.org).

Raising the minimum wage in some states does not appear to have had a negative impact on

job growth. As stated previously, minimum wage workers make up approximately 1.92% of

the working population. That is roughly 1,457,280 workers and the number will only

increase over times. The 13 states that raised their minimum wages have added jobs at a

faster pace than those that did not (qtd. Minimum Wage; United States Department of

Labor). As stated above, only the states that increased their minimum wage were the states

that were able to experience job growth. This is because when pay wages are increased,

people feel appreciated and they tend to work harder or attempt to get a job (businees.com

editorial staff). If too many people begin to feel this way, then more jobs have to be created

so that jobs can be provided for all those who want to work. Also, the Economic Policy

Institute stated a minimum wage increase would inject an estimated $22.1 billion net into

the economy and create about 85,000 new jobs over a three-year phase-in period

(ProCon.org). The predicted amount of jobs in the future given that there is an increase in
 the minimum wage, supports the claim that increase in the minimum wage will allow

spurred job growth. Through this article, a reader can understand that the minimum wage

does have an immediate and direct effect on job growth. This quote also directly refutes the

counter argument that increasing the minimum wage has no effect on spurred job growth.

As a part of the federal government, Congress must raise the federal minimum wage

by amending the Fair Labor Standard Act. Raising the minimum wage will not only produce

a heavier flow of income for most workers, but it will also encourage economic spending

and growth. If the minimum wage is increased, the fewer people will require welfare

assistance. Finally more people will be encouraged to work because of the increased

minimum wage pay value and the workforce population will experience spurred job growth.

Footnotes

1. David Cooper, "Raising the Federal Minimum Wage to $10.10 Would Lift Wages for Millions and Provide a

Modest Economic Boost," Economic Policy Institute website, Dec. 19, 2013

Works Cited

BUSINESS.COM EDITORIAL STAFF. "Real Talk: The Potential Impact of a $15 Minimum

Wage." Business.com, Purch, 22 Feb. 2017, www.business.com/articles/

the-potential-impact-of-a-15-dollar-minimum-wage/. Accessed 14 May 2017.

 Chamberlain, Kaufman, and Jones Attorneys at Law. "FLSA Home Page." flsa.com,

edited by Chamberlain, Kaufman, and Jones Attorneys at Law, Chamberlain,

Kaufman and Jones, 1997, www.flsa.com/coverage.html. Accessed 14 May 2017.

Cooper, David. "Raising Minimum Wage Would Reduce Public Assistance Spending."

National Low Income Housing Coalition Resource Librabry. National Low

Income Housing Coalition, 16 Feb. 2016, nlihc.org/article/

raising-minimum-wage-would-reduce-public-assistance-spending. Accessed 12

Feb. 2017.

---. "Raising the Federal Minimum Wage to $10.10 Would Lift Wages for Millions

and Provide a Modest Economic Boost." Economic Policy Institute, economic

Policy Institute, 19 Dec. 2013, www.epi.org/publication/

raising-federal-minimum-wage-to-1010/. Accessed 14 May 2017.

Cooper, David, and Douglas Hall. "Raising the federal minimum wage to $10.10

would give working families, and the overall economy, a much-needed boost."

Economic Policy Institute, 13 Mar. 2013, www.epi.org/publication/

bp357-federal-minimum-wage-increase/. Accessed 14 May 2017.

Covert, Bryce. "Raising The Minimum Wage To $10.10 Would Boost Growth By $22

Billion." ThinkProgress.org, ThinkProgress, 19 Dec. 2013, thinkprogress.org/

raising-the-minimum-wage-to-10-10-would-boost-growth-by-22-billion-f5ccea4c8e1d.
Accessed 24 Mar. 2017.

Desilver, Drew. "Who makes minimum wage?" Pew Research Center,

www.pewresearch.org/fact-tank/2014/09/08/who-makes-minimum-wage/. Accessed

14 May 2017.

Duke, Brendan. "To Raise Productivity, Lets Raise Wages." Center for American

Progress, 2 Sept. 2016, www.americanprogress.org/issues/economy/reports/

2016/09/02/142040/to-raise-productivity-lets-raise-wages/. Accessed 12 Feb.

2017.

Konczal, Mike. "No, we dont spend $1 trillion on welfare each year." The

Washington Post, 12 Jan. 2014. TheWashingtonPost.com,

www.washingtonpost.com/news/wonk/wp/2014/01/12/

no-we-dont-spend-1-trillion-on-welfare-each-year/?utm_term=.6e62d197f3bc.

Accessed 31 Mar. 2017.

---. "Wonkblog Economists agree: Raising the minimum wage reduces poverty."

The Washington Post, 4 Jan. 2014. Washingtonpost.com,

www.washingtonpost.com/news/wonk/wp/2014/01/04/

economists-agree-raising-the-minimum-wage-reduces-poverty/

?utm_term=.f42ab9e929dc. Accessed 12 Feb. 2017.

 Minimum-Wage.org. "Maryland Minimum Wage 2016, 2017." Minimum-Wage.org,

Minimum

Wage News, www.minimum-wage.org/states.asp?state=Maryland. Accessed 2 Apr.

2017.

Procon.org. "Should the Federal Minimum Wage Be Increased?" Procon.

Procon.org, minimum-wage.procon.org/. Accessed 14 May 2017.

"Raising the Minimum Wage." AFL-CIO.org, AFL-CIO, aflcio.org/what-unions-do/

social-economic-justice/minimum-wage. Accessed 14 May 2017.

Sessions, David. "MINIMUM-WAGE EXPLAINER Five Things You Didnt Know

About the

Minimum Wage." Daily Beast, 15 Feb. 2015. Daily Beast,

www.thedailybeast.com/articles/2013/02/15/

five-things-you-didn-t-know-about-the-minimum-wage. Accessed 14 May 2017.

The Two-Way; Breaking News from NPR. 19 July 2014. NPR, npr, www.npr.org/

sections/thetwo-way/2014/07/19/332879409/

states-that-raised-minimum-wage-see-faster-job-growth-report-says. Accessed

12 Feb. 2017. Transcript.

United States Department of Labor. "Fair Labor Standards Act Advisor; What Does
 the Fair Labor Standards Act Require?" United States Department of Labor,

United States Department of Labor, webapps.dol.gov/elaws/whd/flsa/

screen5.asp. Accessed 12 Mar. 2017.

---. "Minimum Wage." United States Department of Labor, United States Department

of Labor, www.dol.gov/general/topic/wages/minimumwage. Accessed 2 Apr.

2017.

Unites States Department of Labor. "Minimum Wage Laws in the States - January 1,

2017." United States Department of Labor. Unites States Department of

Labor, www.dol.gov/whd/minwage/america.htm#content. Accessed 14 May

2017.

"Wage and Hour Division (WHD) Minimum Wage." United States Department of Labor,

United States Department of Labor, www.dol.gov/whd/minimumwage.htm.

Accessed 14 May 2017.

 Annotated Bibliography

1. MLA Citations: Cooper, David, and Douglas Hall. "Raising the federal minimum

wage to $10.10

would give working families, and the overall economy, a much-needed boost."

Economic Policy Institute, 13 Mar. 2013, www.epi.org/publication/

bp357-federal-minimum-wage-increase/. Accessed 14 May 2017.

Procon.org. "Should the Federal Minimum Wage Be Increased?" Procon.

Procon.org, minimum-wage.procon.org/. Accessed 14 May 2017.

"Raising the Minimum Wage." AFL-CIO.org, AFL-CIO, aflcio.org/what-unions-do/

 social-economic-justice/minimum-wage. Accessed 14 May 2017.

______________________________________________________________________________

Annotation here: All of these sources have to do with explaining how raising the federal

minimum wage will improve the American economic system and promote economic growth. The

sources provide comparative information on the pros and cons to raising the minimum wage on

how that will impact the economy.

2. MLA Citation: Cooper, David. "Raising Minimum Wage Would Reduce Public Assistance

Spending."

National Low Income Housing Coalition Resource Library. National Low

Income Housing Coalition, 16 Feb. 2016, nlihc.org/article/

raising-minimum-wage-would-reduce-public-assistance-spending. Accessed 12

Feb. 2017.

Konczal, Mike. "No, we dont spend $1 trillion on welfare each year." The

Washington Post, 12 Jan. 2014. TheWashingtonPost.com,

www.washingtonpost.com/news/wonk/wp/2014/01/12/

no-we-dont-spend-1-trillion-on-welfare-each-year/?utm_term=.6e62d197f3bc.

Accessed 31 Mar. 2017.

______________________________________________________________________________

Annotation here: The purpose of these two main sources along with several secondary sources

are used to proved that raising the federal minimum wage can play a role in reducing government

welfare spending.
3. MLA Citation: The Two-Way; Breaking News from NPR. 19 July 2014. NPR, npr,

www.npr.org/

sections/thetwo-way/2014/07/19/332879409/

states-that-raised-minimum-wage-see-faster-job-growth-report-says. Accessed

12 Feb. 2017. Transcript.

ProCon.org. "Should the Federal Minimum Wage Be Increased?" ProCon.org, 2005,

minimum-wage.procon.org/. Accessed 18 Feb. 2017.

"Minimum Wage." United States Department of Labor, United States Department

of Labor, www.dol.gov/general/topic/wages/minimumwage. Accessed 2 Apr.

2017.

______________________________________________________________________________

____

Annotation here: The purpose these sources are to demonstrate and provide information on how

raising the federal minimum wage can help to spur job growth in the U.S. The sources go in

depth giving vivid and descriptive information on the correlation between the minimum, it

increasing, and what impact it has on job growth in America.