In addition, Democrats are pushing for the elimination of the tipped minimum wage. Although only 2 million workers earn the minimum wage or less today, roughly 23 million workers would get a pay increase if the plan were to become law. The Democrats are pushing to raise the wage floor to $15 by 2025. More than that, new economic evidence suggests that those costs might be small ones anyway: Even in low-wage, low-density, low-cost-of-living parts of the country, a $15 minimum might not be a death knell for small businesses or a job killer for low-wage workers. The benefits of a $15 minimum would greatly outweigh the costs. Yet minimum wages have a way of screwing with economic intuition, and complicating the simple logic of supply and demand. Make something more expensive, people buy less of it make the wage floor higher, businesses will buy less low-wage work. Democrats are proposing to more than double the wage floor to its highest-ever level, asking tens of thousands of businesses to give large raises to millions of workers. That, at least, is the argument being made by many economists, businesses, lobbying groups, and conservative politicians as the proposal comes under congressional consideration. ![]() The result would be straightforward: higher wages, but also the closure of mom-and-pop stores higher prices on everything from gas-station tacos to day care a rise in unemployment, particularly among teenagers and strain in low-wage, rural economies. They hope that their work will go some way towards shifting attitudes across the business and policy communities to increases in minimum wage laws and reframing such policies as commercially positive rather than negative.The Biden administration and House and Senate Democrats want to raise the national minimum wage from $7.25 an hour to $15 an hour. The authors conclude that the long-term impact on teens substituting time studying for time working in the labor market should be considered a benefit, not a cost, of minimum wage policies. Therefore, there are now more incentives for adolescents to focus on studies in the market at large. What's more, the paper found that the effects are amplified by the growing availability of college financial aid programs that reward high school students for strong academic performance. The study also cites recent research that shows a 10% increase in the minimum wage reduces the high school dropout rate by about 10% among students from low socio-economic backgrounds. While employment in that sector decreased, teens overall earned more, enabling them to work less and study more. The researchers found that a higher minimum wage led to lower employment only among high school-age workers in small businesses. Moreover, higher wages result in less employee turnover, less advertising, and less training for new workers, which ultimately benefits the owners and does not harm their profits. In fact, some restaurants have already passed on the increased costs to consumers, and the small price increase did not drive them away. However, the authors suggest that if all businesses in the industry face the same shocks and costs, the market response might be a moderate price increase. They worry about how they can manage the higher costs without having to reduce staff or profits. ![]() ![]() Mutually beneficialĪccording to the researchers, when employers learn that minimum wages will increase, they typically focus on the impact it will have on their own businesses. Additionally, governments currently expend millions of dollars annually on tax incentives for companies that confront government-mandated minimum wage hikes, expenses that may prove unnecessary. These findings carry important implications for public policy, not the least of which is a reduction in poverty and financial insecurity. However, the researchers found that higher wages often enabled teenage employees to work fewer hours, leading to increased study time. In the past, business organizations have warned that teenage workers are most susceptible to losing their jobs when the minimum wage is increased. A working paper that emerged last autumn has demonstrated that minimum wages set at $15 or higher in various states and municipalities, including California, have improved the financial security of employees, without causing their employers to resort to job cuts.
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