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Proposal Essay
By definition, the minimum wage is the lowest wage permitted by law or by a special agreement. It was initially introduced with the purpose of stabilizing the post-depression economy and protecting workers in the labor force. In this day and age, the minimum wage is designed to create a minimum standard of living to protect the health and well-being of employees. Despite varying across states, the federally imposed minimum wage stands at a long-obsolete $7.25 an hour. This has raised an uproar among minimum wage earners who struggle to meet the demands of everyday life, considering the significant inflation the economy has experienced since the $7.25 basement was introduced. By challenging this law strenuously and rallying for its improvement, these workers have raised nationwide awareness of this issue and have sparked perhaps one of the most complex debates in society these days. Recently, their efforts have paid dividends, with various states such as New York, Massachusetts, and New Jersey following in the footsteps of San Francisco in raising the minimum wage to a more appropriate $15 per hour.
However, despite the obvious benefits a minimum wage raise may have, some underlying drawbacks loom large. Lawmakers are attempting to address these issues in the process of drafting legislation to raise the minimum wage. The main argument against the raise is the fact that if labor markets are competitive, a minimum wage could cause unemployment because firms will demand less labor, and higher wages may encourage more workers to supply their labor. Another concern is that a raise can cause cost-push inflation. This is because firms face an increase in costs which are likely to be passed on to consumers. This is even more likely if wage differentials are maintained. Also, a minimum wage raise may encourage an increase in the number of people working on the black market so firms can avoid paying the legal minimum. All these problems among others are what lawmakers are trying to inform the public about. In this much-anticipated raise, there are significant disadvantages that should be addressed and perhaps a different, more wholesome way to tackle them should be introduced.
In my opinion, despite its immediate benefits, a simple minimum wage increase is not enough considering the increasing amount of concerns behind it. I believe that along with it there should be another legislation that will complement the minimum wage raise and perhaps tackle some of the inevitable impacts the raise will have on the economy, workforce and market. This would be to raise the Earned Income Tax Credit commonly referred to as EITC. This federal program benefits middle and low-income households. The credit equals a fixed percentage of earnings from the first dollar of earnings until it reaches its maximum. The maximum credit is paid until earnings reach a specified level, after which it declines with each additional dollar of income. Proponents of raising the Earned Income Tax Credit say that doing so would more effectively aid low-income families than raising the minimum wage. Some immediate benefits are that it is a policy that already exists, therefore it will require much less legislation work for it to be ready. Also, it is already doing a great job, the EITC lifted about 6.5 million people out of poverty, including about 3.3 million children in 2015. More than that, research shows that the EITC strengthens families, communities, and the country in a number of ways.
The benefits the EITC has for the workers are obvious. For a start, workers mainly use their tax credit to pay for necessities like groceries, transportation, medical expenses, rent, and utilities. The tax refund can also help workers build savings and establish financial stability. It can also provide a short-term safety net. Almost half of the taxpayers with children claimed the EITC at least once during an 18-year period, providing a source of temporary insurance and preventing entry into poverty. Also, research suggests the EITC improves health, with the most robust results for single mothers and children. Mothers experience health improvements through reduced stress. Among children, there is a decreased incidence of low birthweight and improvements in the home environment, nutrition, and educational and economic attainment. All these are several examples of how the EITC benefits workers.
For a policy to be effective, it should have significant positives for the employers. The way EITC is set up is to encourage and reward work. Therefore, employers will have a more productive and lively labor force. It also supports local jobs and businesses in several manners. To begin, EITC recipients are now able to spend more money thus creating more cash flow around them. With this increased spending, businesses in turn are able to grow and spend more in response, either delivering a better product, increasing their employees’ wages, or both. With a study from Columbia University indicating that the EITC is linked to increased life expectancy, this means that employers can expect healthier workers for a greater amount of active years in the workforce. With money moving around, a healthier workforce, and a happier society overall, employers should expect their businesses to thrive under the EITC legislation.
After satisfying both workers and employers, the raise in Earned Income Tax Credit does have a significant positive impact on the state. Firstly, it promotes further education in the way that it increases children’s educational performance and attainment. Children in families receiving the EITC score higher on tests and are likelier to graduate from high school, enroll in college, and earn more when they enter the workforce. In turn, it increases workforce participation and encourages low-wage workers to get additional education or training to boost their employability and earning power. The need for additional education by both children and workers increases the income of public state schools or universities. The fact that these people can now attain degrees aids the state significantly as both the intellectual and economic aspects of the society receive a boost.
There is, however, one objection that is commonly made since the EITC is a subsidy from taxpayers. However, since it is the public as voters insisting that incomes must be higher then it should be the public as taxpayers paying that higher bill. It is very easy to shout that everyone should be getting a living wage, especially if we then say that someone else has to be paying that living wage. It should be considered a rather more moral option that we sacrifice economically for the changes we push and believe in for our fellow members of society.
All in all, the debate on minimum wage will continue to hold the utmost importance in today’s society. There are several arguments to be made for either side, and it becomes a multi-faceted discussion if you mix in all the alternative solutions that exist. In my opinion, the advantages of raising the minimum wage slightly outweigh the disadvantages, but the already existing policy of the Earned Income Tax Credit trumps the rest of its alternatives. With its obvious benefits to all aspects of the economy, it is a safer and perhaps smarter approach to dealing with poverty. The benefits it provides to workers cover several areas including welfare, education, and health. Employers can expect a more productive and more skilled workforce, while the state can stand to benefit from the increased flow of the economy in places such as public schools. There is no doubt that something needs to be done. By postponing or not supporting policies such as these and being conservative, people fall into the trap of politicians where words are being exchanged at a great rate but no action is taken. For this reason, I believe the EITC policy has shown enough evidence and shows significant potential through respected research that it should be adopted immediately by any state that aims to reap the benefits of a reenergized, healthier and happier society.
Sources:
- http://www.taxcreditsforworkersandfamilies.org/news/eitc-linked-increases-life-expectancy-among-low-income-americans/
- https://www.theatlantic.com/business/archive/2018/01/eitc-getting-people-to-work/549416/
- https://www.forbes.com/sites/timworstall/2016/07/07/dont-raise-the-minimum-wage-and-kill-jobs-increase-the-eitc-instead/#5c5d48d660df
- https://www.healthaffairs.org/do/10.1377/hpb20180817.769687/full/
- https://www.chicagotribune.com/business/careers/ct-biz-0317-work-advice-huppke-20140317-column.html
- https://www.vox.com/2019/5/8/18528098/national-federal-minimum-wage-fight-for-15
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