Last Wednesday march 26,
Connecticut became the first state in our country to pass legislation to
increaser the minimum wage to $10.10 an hour. The bill was approved through
general assembly and will be in effect by 2017. Governor Dannel P, Malloy and
President Obama publicized the proposal and the governor states that increasing
minimum wage is not just good for workers; it’s also good for business. Congress
and other lawmakers are excited about what Connecticut is doing and believe it
will help things at the federal level move into the same direction. But when
the minimum wage is increased the unemployment rate will rise and people are
going to lose their jobs. In Connecticut between 70,000-90,000 people earn
minimum wage and their wages will continue to rise over the following years as
the new bill continues to increase wages.
http://www.nytimes.com/2014/03/27/nyregion/connecticut-is-increasing-hourly-pay-to-10-10.html?ref=economy
Maybe Mallory's approach to wages is more appropriate for Connecticut (not that I can either way), but the top-down approach that raising the minimum wage represents at the national level is not the most efficient way to help low-income people. The better policy--favored by most Economists--is to use the EITC (Earned Income Tax Credit) to effectively raise the wages of people who work 40 hours a week. This is preferable for several reasons: first, a higher minimum wage is called a small-business tax because small-businesses more often employ people at the minimum wage and must bear this increase in wage costs (more income taxes to match, etc.); second, the EITC benefits those who work more (incentivizing work which boosts total possible GDP growth).
ReplyDeleteI agree with Tyler that there can be negative effects to increasing the minimum wage. Although I believe in increasing the minimum wage to a certain point, if we increased it too much, there can be negative results. Already, various businesses are starting to replace workers with machines that can do some of the manual work that people use to do. Businesses are doing this, because an increase in wages has made it more profitable to just use machines that can perform the same tasks. By increasing the minimum wage too much, this issue can become a bigger problem.
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