Optimal minimum wage policy for the united states

Document Type:Research Paper

Subject Area:Economics

Document 1

The United States Labor Law is the basis for which the setting of the minimum wage for the workers in America is done. This is in conjunction with some of the state and local laws. The current policy indicates that the minimum wage that should be paid to workers is 7. 25 dollars per hour. Hence, the term optimal comes in to represent the interests of both the employers and workers in the sense that the former is allowed to pay amounts that do not see him or her carry a lot of burden in matters regarding wages, whereas the latter is being protected from exploitation. It is important to consider the idea that a lot of people work on minimum wage and by increasing the wage per hour to 8.

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25 dollars then they stand to benefit a lot. On the other hand, the employers will not have to dig deeper into their pockets because it is not a significantly large increment that may lead to the closure of businesses. An increase in the minimum wage means that workers will increase their spending. This implies that the government will find more avenues of collecting taxes thereby raising more revenue. This is possible because companies will need to offset the labor costs to some extent due to the slight increase in the minimum wage. This will bring about a slight increment in the taxes remitted by firms. The same scenario occurs when it comes to the income tax of the individual people. Once the minimum wages are increased, personal income tax will raise and thereby making the government collect more revenue.

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Another important objective is to reduce citizens’ reliance on governmental aid programs. Once the wages increase, the citizens gain more purchasing power and this helps them to deal with the high living standards that are often caused by inflation. Limitations to Achieving the Set Goals There are a number of limitations that may hinder the achievement of the above-named objectives, which need to be put into consideration. One of the issues is that employers who have very tight budgets might decide to get rid of some of their employees in order to stay in business. This is understandable because not all employers work with the same budget and this is due to the differences in revenue generation. Those who earn enough profits to take care of their expenses and still remain profitable will find no need for laying off some of their workers.

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The Winners and Losers of the Minimum Wage Increment As is currently constituted in the United States, the minimum wage stands at 7. 25 dollars per hour. Increasing this by one dollar will mean that the workers and government benefit whereas the employers lose out slightly. The workers will gain because their pay will slightly increase and this makes them better off than they currently are. The slight increase in their income means that they receive a boost financially such that they can do something extra with their income, which they cannot do as is currently constituted. This means that the amount of money deducted from a workers wage will be slightly more when the wage is at 8. 25 dollars per hour than when it is at 7.

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