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US minimum wage has been progressively launched by politicians to officially increase from $7.25 to $15 an hour gradually. With this, it is bound to make a difference in the economy.
US Minimum Wage from $7.25 to $15
The proposed raise is far greater than in the recent past, but proponents say it is justified because the wage has been lifted for more than a decade, and the existing minimum wage in the United States is too little for life.
First passed as part of the Fair Labor Standards Act by Congress in 1938, the wage was revised several times, most recently in the year 2007, when Congress voted to gradually increase it from $5.15 to $7.25 an hour.
Since then, the minimum wage has been increased by many states and local governments to $15 an hour or to other amounts, both higher and lower.
The federal amount of $7.25 is actually honored by 21 of the 50 states, while the remaining states have a greater minimum.
According to Resourceful Enforcement, which monitors labor laws, twenty-five states currently forbid cities and counties from setting a higher local wage than the state level.
Under bills passed in the House and Senate by Democrats, the minimum wage will increase to $9.50 an hour three months after the bill was enacted, and then to $15 over a five-year period at four intervals.
The proposal also increases the base pay for waiters and other workers who depend on tips and directs the US Secretary of Labor to measure the median hourly wage of all staff on an annual basis.
The federal minimum wage of the United State must be increased by the same amount in years where the median increases.
In a 2019 Congressional Budget Office study, opponents of the higher wage point to a finding that said raising the amount to $15 an hour would result in 1.3 million employees losing their jobs.
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US minimum wage increase, what the economist says
The majority of Americans share the excitement of President Joe Biden for raising the federal minimum wage from $7.25 to $15 an hour. According to the Pew Research Centre, a polling company, two-thirds of them, and more than 40 percent of Republicans support such an increase. Economists are more divided, however.
In 2015, when a panel of eminent academics was asked whether a minimum of $15 would deliver a major blow to jobs, 40 percent of respondents were unsure, and the remainder were equally divided for and against.
There must be a reason for the indecision: there is little practice in the world of major minimum-wage increases, which may cost employment for the economy. However, history also shows that such increases can nevertheless have beneficial longer-term consequences, enforced with caution.
As most once did, economists no longer reflexively reject minimum wages. Over the past three decades, empirical analysis has shown that moderate rises in the minimum wage usually have a slight negative impact on jobs at most.
Arindrajit Dube of the University of Massachusetts at Amherst concluded in an overview of research conducted for the British government in 2019 that minimum wages of up to 60 percent of the median wage, or 80 percent of the median in low-wage regions, have marginal effects on jobs. Firms have more scope than economists once thought to absorb the expense.
In a way primarily decided by the bargaining power each side exercises, a match between a job and a worker generates a surplus to be shared between employee and employer. Minimum-wage laws will help more of this surplus be absorbed by workers. Higher pay comes from the earnings of businesses with no associated cost of work.
