To begin with, the world economy is versatile and volatile. The development of a country is a process which should be constant and with clear perspectives. People try to simplify these processes to make their life easy, but still there are many facets of the economic growth of the country. The United States of America represents a model of intermutual actions between various factors which influence the picture of a country’s well-being. On the whole, one cannot but realize that productivity of the population is the main means for its progress.
To work out the point of wages increase and the effect of such measures, it is useful to appeal to the article by David R. Henderson “If Only Most Americans Understood”. Here the author gives some pieces of information about possible minimum wage increases from $5.15 to $7.79 per hour, the reasons and repercussions of such a measure.
First, there must be an explanation about the way such innovations lead. A man can work trying to earn as more money as it is possible to keep his life and to support his family. While working a man also thinks over the products prices or services needed, so that to detach a definite sum of money out of the wages. The initiative of the Congress to increase current wages up to $7.79 seems for many people senseless and useless as well.
The congressmen are trying to implement something new or the population by means of technical change of the wages. It stays clear and benevolent, but there is another problem as of the situation when the prices grow up with such increase of wages. Another problem is that plenty of the employers cannot pay their employees. The answer remains unanswered: Would it be great and convenient to set up wages? What are the hypothetico effects of such innovation? Are people aware of the current increased wages?
Even if they understand that this will cause them to pay higher prices on goods and services, they see that as a worthwhile price to pay. But economists of various political stripes tend to oppose the minimum wage. We understand that it will help only a subset of the people it is thought to help, and will help them only a little — while hurting some of them a lot. (WSJ, 2006)
The situation is no-brain because politics providing people with this novation do not mention the mechanism of its realization strictly regarding the idea of general improvement of life in the US. As people are not fully aware of the real reasons for the issue they apply such actions without any doubt. The reason is that many providers of such measures are involved in the system of beneficiation by means of people’s agreement with them. Another thing is that “Raising the minimum wage by a substantial amount would price working poor people out of the job market.” (WSJ, 2006) People do not even understand the result of the salary increase.
It has nothing to do with rich people, but as for the poor ones this may cause other destructive effects in the economy of the United States. The factor of jobless claims will go down causing relapse of the national currency. Along with that unemployment may expand into strikes. It can be said so, because while saying about growth of the Government does not even mind the jobs. People are not guaranteed to obtain a definite work position. The main idea is that they will be given increased wages and that is all.
Economists’ consensus estimate is that a 10% increase in the minimum wage would destroy 1% to 2% of youths’ jobs. A federal increase to $7.25 would, therefore, destroy about 800,000 to 1.6 million youths’ jobs. Some older low-skilled workers would also suffer. (WSJ, 2006)
Why should people suffer from wrong actions of the Government? It would be effective to maintain the previous check to prices when people get used to the current situation. On the other hand, it concerns youth. One cannot say about the growth of the country without using the labor of youth. A young man usually designs to make careers in his life, but seeing such occasional obstacles it would be hard for a youngster to go “Per aspera ad astra”.
It is known that young people earn less than experienced ones, so they need time to fulfill their desires of improving life. From teen age until late 20s their path looks like a constant and cruel struggle. Why should the Government travel the lives of young people? There must be a rapid solution to this problem. Again defects are observed in above mentioned adoption of the Government.
The fact of wages for youth is also complicated in terms of the nationality diversity within Americans. The part of the society (African Americans) is limited in the question of job choice; they try to get a job, first of all. The issue does not stand about the wages rate and conditions of working. As Henderson notes:
These adverse longer-run effects, they found, were stronger for black teenagers. Their finding recalls the famous line from liberal economist Paul Samuelson’s 1970 textbook, “Economics,” about a proposal to raise the minimum to $2: “What good does it do a black youth to know that an employer must pay him $2.00 an hour if the fact that he must be paid that amount is what keeps him from getting a job?” (WSJ, 2006)
Democracy is thought to be growing in the United States, but the reality shows the ongoing opposition in American society between white and black people. This standpoint is omitted for some reason in many governmental acts. To create another picture of providing reforms in the country, all layers of the population should be included into the process of vivification in the US.
Returning to the raised problem there is a sort of doubt. If there is a loss of 1% to 2% of youths’ jobs, does it stand for the problem, when the rest of youngsters are involved in their jobs? This cannot be a compromise looking at the present day situation in America. The reasons lend itself to the following: first, there are many young people working and gaining more than it is properly suggested.
79% earned a wage higher than $7.75, and there’s no guarantee that these workers would get an increase. Some, but probably not most, would get what are called “spillover benefits” because of the new pressure on the wage structure. (WSJ, 2006)
Here one can see a catch for young people, because the fact of wage increase does not concern their employers – they pay higher salary as it is. Second, wage growth is not a way out for making labor more effective. The employers in this case will see other measures to be reimbursed, such as: “by cutting non-wage benefits, by working the labor force harder, or by cutting training.” (WSJ, 2006)
The Economic Policy Institute (EPI) tries to moderate the process of such wage increase and even placed on its web site the information about so-called codex of n employers’ actions: “Employers may be able to absorb some of the costs of a wage increase through higher productivity, lower recruiting and training costs, decreased absenteeism, and increased worker morale.” (WSJ, 2006) As it is described, with various problems on the job market in the US people in higher positions are still trying to complicate the whole procedure of recruiting people, their training and providing them with rights and liabilities. In fact, the scheme of interviews in the employment of the staff may appear to be endless for an ordinary job-seeker.
Another view states that such change of a minimum wage is made for the worst protected strata of the American population, namely, for those who became the only breadwinner in the family or those people who are of limited means or limited in physical labor. All these cases should be counted up, of course, but looking at the percentage of this layer of people one cannot but agree with its small rate.
Realizing the stages and requirements when people find employees it is obvious that notwithstanding the reduction of jobs for youth there is a danger not to obtain the position one pretends. David Henderson notes in his editorial that “a minimum wage increases unemployment among young and unskilled workers.” (WSJ, 2006) Many gurus of economic development in the United States are still making great efforts with an eye to find optimal reasoning about the problem. Theoretically, it is great when the state takes care of its nation. It helps to govern reforms and ensure safety in terms of social facilities. It is agreed that to impact new standards of life, but looking at one, better, side of a medal human beings should not be unsophisticated not realizing the worse side of it. What is the matter of such case?
David Edward Card in his “Handbook of Labor Economics” depicts a case, which happened in New Jersey, when an increase of a minimum wage adopted by the local Government caused a higher level of jobless claims mainly at coffee-and –sandwich industry. It was higher than in Pennsylvania where there were not such measures about wage level. (Card, 1999) This example is a simple demonstration of the probable mistakes which again appeared in modern America. This case bewildered many observers and experts of the job market. Leading economists tried to figure out in advance all possible drawbacks, but as the proverb reminds: “Every bean has its black.”
To conclude, now it is clear that increasing wages is not a way out in terms of decreasing jobs. People usually do not want such changes in the country. In fact, everyone is trying to reserve more money in the family budgets. The dilemma between increase of a minimum wage and, as a result, loss of a job terrifies with its mutual relation. The paper points out the two sides of the one medal: a possible profit and relevant risk for the American economy. This illustrates a constant urge of people to do something good, but without possible precautions. In other words, it is like when human beings fix one thing and break another.
In addition it is important to quote the words by David R. Henderson about the reason of the problem when he concludes for whom this wage increase is appropriate and who provides this policy on the whole:
The focused support for the minimum wage comes mainly from labor unions, all of whose members earn more than the minimum. This isn’t benevolence at work, but greed. Their leaders understand that the minimum wage prices out their low-wage competition: it acts like an internal tariff. If only most Americans understood. (WSJ, 2006)
Works cited
Henderson, David R., ‘If Only Most Americans Understood’, Wall Street Journal. (Eastern edition). New York, N.Y.: 2006.
Card, DE, ‘Handbook of Labor Economics’, Elsevier, 1999.