Two Essays

Essay 1: Minimum Wage

Thesis Statement

The minimum wage for a working American is just $5.65 per hour. There exists a strong argument in favor of minimum wage rate to be increased so that the daily wage workers can get some respite thus enabling them to be included in the mainstream workforce.



Introduction

A classical economic analysis of supply and demand indicates that by mandating a price floor above the equilibrium wage, minimum wage laws will cause unemployment. This is because a greater number of workers are willing to work at the higher wage, while a smaller numbers of jobs will be available at the higher wage.

There is a concern about the effect of the minimum wage on employment of low-skilled labor. When states adopted living wages that were 50 percent to 200 percent higher than the current minimum, 71 percent of economists believed it would decrease the number of hires, and 68 percent of respondents said it would cause companies to hire workers with better skills or experience (Prasch, 2006).

Companies can be more selective in who they employ, thus, the least skilled and experienced workers will typically not be hired. There are, however, many other variables that can complicate the issue, such as monophony in the labor market, whereby the individual employer has some market power in determining wages (Kennan, 2008).

Discussion

In this paper I would like to support the assertion that minimum wage laws increase unemployment among unskilled workers, particularly in the African-American community. According to the Mackinac Center for Public Policy, the passage of the first national minimum wage in the United States in 1933 led to an estimated half a million black workers losing their jobs via replacement by higher-skilled and better-educated white laborers. Milton Friedman, 1976 Nobel Prize winner in economics, called the minimum wage one of the most “antinegro laws” ever passed. However, the International Labor Organization and the Organization for Economic Cooperation and Development do not believe that the minimum wage can be directly linked to unemployment in countries that have suffered significant job losses (Card, 2007).

The standard theory predicts that firms will hire fewer workers as a result of the higher wage. Thus while some workers benefit from the higher wage, others lose when they lose their job. Furthermore low-skilled workers are likely to enter the labor force in response to the higher wage. There are more low-skilled workers in the labor force, but fewer of them are employed, thus the unemployment rate for these workers increases. Employers who traditionally hire low-skilled labor will over time adjust their production process away from labor and toward machinery. The transition may take some time, making it difficult to determine the employment effects of the minimum wage in practice. However, studies traditionally found a negative correlation between the minimum wage and employment for the least-skilled members of the workforce (Prasch, 2006).

Some recent empirical studies have indeed found a positive employment effect associated with an increase in the minimum wage. However these findings focused on a narrow group ...