A common trend in the world of economics is the fine balance between the benefits versus the costs in certain policies and actions. In order to attain a goal, sometimes decision makers need to know that there will be negative consequences to their plans, yet ideally, the positive factors will outweigh the negative. In a real world, case study example, we can see how the state of California will react to an increase in the minimum wage. Currently, the wage is $10 per hour, however in the New York Times article by Noam Scheiber and Ian Lovett, they describe the outlined plan that the state unveiled to act as an "economic guinea pig" and raise the minimum wage to $15 over the next years, or by 2022 in the end result.
I enjoyed this article, not only due to its relevance of the material we are currently studying in class, but also for the way it candidly spoke about both the pros and the cons of raising the minimum wage in a state like CA where the cost of living is rather high and there are income disparities between the very rich and the very poor. On one hand, the article points that the change could lead to a higher living standard for the citizens in the cities since, as a legislator pointed out, this action is "a matter of economic justice.” On the other hand, however, there are significant consequences including a personal story that the article mentions that a local restaurant owner, Craig Sharton, had to close his business on Mondays and Tuesdays since he could not afford to pay his employees when the wage already rose from $9-$10. Furthermore, the authors mention that the higher wage would cause more unemployment in cities like LA and San Diego versus San Francisco and Fresno. In the end, even though it might be ideal and help workers to have higher wages, it is also important to balance the outcome.
Link: http://www.nytimes.com/2016/03/29/business/economy/15-hour-minimum-wage-in-california-plan-has-some-worried.html?ref=economy
The dialogue surrounding the idea of raising the minimum wage has taken the form of isolated sides, usually two, who only hold to the pros of their sides. It's great to see that the writers of this article are humble enough to look at the consequences, good and bad, in their entirety rather than minimize them to only the good or only the bad.
ReplyDeleteAn increase in wages may sometimes have undesirable effects such as firms shutting down. Hopefully the effects of this wage change won't have too many unintended adverse effects on the economy.
ReplyDeleteThis is an interesting article and a very touchy subject among people most of the time. I think one thing surrounding the issue of raising the minimum wage or not is geographical location. While $15 may be needed in California, in other areas where it is less expensive to live this drastic of an increase may not be necessary. I think instead of only using one extreme as a "guinea pig" we should rather use several in varying geographic locations in order to set a standard for varying living expenses to set minimum wages for states according to these measures. It will be interesting to see where this issue goes and how they go about resolving the issue that is currently going on.
ReplyDeleteI'm interested to see how this will play out in California. The subject is so touchy, and both sides have great arguments. Even economists cannot agree on the subject of minimum wage. Personally, I think that this will have more negative effects than positive ones, but that is just an estimate. I'm no expert, so I could easily see myself being proven wrong.
ReplyDeleteI have many concerns as well regarding this new legislation. Many minimum wage workers are demanding it, although I don't think they necessarily realize the negative implications it will have. It will hurt smaller businesses, cause businesses to hire less workers and have lower staffing, etc. If this went into effect, unemployment would obviously rise. Given that, I think a more minimal wage increase, to minimize the loss of jobs and businesses would be most effective.
ReplyDeleteMy post this blog period was about how New York recently passed a law to raise the minimum wage in more costly parts of the state to $15 per hour. I think that these minimum wage increases would significantly hurt businesses, especially small ones. It could also have the effect of putting more people out of work, making people worse off than when they had low paying jobs.
ReplyDeleteI thought that this was interesting read. I feel like the wage increase will cause the prices to increase and people will start buying less from these companies which in the long run companies may have to close some of their stores. it will be interesting to see how this all plays out.
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