How The Minimum Wage Act Can Effect You

By | January 10, 2014

In 13 states across America saw a change in the minimum wage act, they all independently increased the amount of money that employers pay their staff. The federal minimum wage act states that the minimum amount an employer has to pay is $7.25 and this has stayed the same since 2009 and it is not linked to inflation.

Minimum wage

Highest and lowest paid states

The highest paid state to live in is Washington with employers now having to pay their staff $9.32 per hour, with the lowest paid state Missouri only just higher than the federal requirement at $7.50. But the other states in America have not taken on the plight of the workers who are trying to live off the federal state minimum.

Hope for the future

There is hope for the future as congress has put in place a possibility of change for the required national minimum wage act to increase and with the possibility that it is then also linked to inflation. The federal government are looking at the prospect of increasing the current minimum wage in three stages over a two year period up to a level of $10.10 per hour. At present the minimum wage hasn’t moved in over 4 years and even though the cost of living has increased the minimum wages have stayed the same. This can make life difficult for those that are trying to live and in many areas the cost of rent is more than many people can afford if they are on minimum wage. This can lead to an increase in the rise of pay day loans and the problems that are associated with this.

Pay day loans are there for those that are vulnerable to the ever increase rise in the costs associated with living, but once they fall into the trap of payday loans it is very difficult to pull yourself free. Some great tips for avoiding pay day loans include:

  • Budgeting
  • Seeking help from organisations (there are free ones out there that can help)

The battles continue

Minimum wage issues continue to battle on, as the 1st of January 2014 the city of Seatac wants people to be paid $15 per hour. This could improve the living conditions of 6000 people, but this is being challenged in court. It could be a short lived pay rise, but if the courts reduce the hourly rate what happens to the money already paid? Will they have to pay this back? This is something that the courts will have to decide. But the move would see an increase in the money in the local economy, those that are the lowest paid will be able to afford to have a few luxuries and this money will be pumped back into the city, creating an economic boost.

The true price

But what price does a minimum wage increase come at? Businesses need to pay for this increase in the wages, if they don’t put up the prices for their services or there is no margin to consume the increase in their profit margins how will they pay? This is the question that is faced by many companies, especially the smaller ones. The only solution is to lose staff, cut the number of employees that you have to pay the current staff the minimum wage and this will ensure that there are adequate funds to continue the business.

The downside to this is the staff that are left will need to endure more pressure in the working environment and maybe more responsibility without the substantial increase in wage. It will be a double edge sword, by giving those that are paid low wages to have an increase but there will be fewer jobs around that will be able to provide the wages. But those who do have a job will have a better standard of living than those without work.

The difficulty that many are facing is moving forward away from these hard times that living in a depression causes and one of them is the increased growth of the economy. This happens when the people work and have money to spend and not just on the essentials but little items of luxury. But to be able to do this they need the money and this comes from working and getting a living wage, one that can support a family so they are able to afford the basics, a home, food and clothing.

Why protect workers

But what is happening, the larger corporations that can afford to pay the staff a living wage tend to stick to the federal minimum wage and use this as a guide for staff. This means that the government needs to intervene and increase the minimum wage act and these effects the small business owners. But because of the increase it means that there are less jobs and this effects the low paid and unskilled section of the communities, there won’t be jobs there for them, they won’t be able to start off on a low paid job and work up the ranks because in effect there won’t be these stages on the job front any longer.

Collaboration

Even the researcher Michael Saltsman from the Employment Policies Institute has stated that there is going to be a problem with the increase in minimum wages.  He believes that with the increase in costs for business going up and no room to raise prices, businesses have to find ways that they can produce the product at a cost that is lower than previously and this has one main consequence, the only option that are open to businesses in this situation is to pay for the increase in wage costs by reducing the wages that you are paying.

In effect the minimum wage act was set up to help those on the low incomes to have a wage that they could use to actually live off, but now this seems to be having the opposite effect and is in turn making these people, the young and the uneducated minorities, unable to find employment in any shape or form.

Is increasing the minimum wage the right thing to do? What are the other options?

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