Example Of Essay On Econ479 Hm3

When the president of USA announces that he might use is executive power over legislation to raise the minimum federal wage, it is very evident that there is a pressure and need to do so. This strong demand comes from lawmakers and other groups, which the government cannot ignore. The current minimum federal wage rate is $7.25 per hour; it is proposed to be increased to $10 per hour. Millions of workers in USA work under federal contracts. The new minimum wage limit is supposed to begin in 2015. The increase in the wage limit will definitely add to the productivity and motivation level but will reduce the turnover. Higher wage would lead to increase in the money supply and eventually increase in inflation. The government is ready to index the minimum wage to inflation to deal with the price rise in coming years. I believe that this move would give a boost to the economies GDP figures. It would increase the real income level of many workers who fall below the poverty line. The current scenario of consumer demand in USA is grim. With increased income the low waged earners demand for goods would also increase, leading to new job opportunities and hiring. The high-earning individuals would like to save the increased portion of their salaries.
In a recessionary market trend increased income means greater economic activity because the low wage workers tend to spend it immediately. The increase in GDP would be greater than the increase in labor cost to the businesses. The best part would be the creation of new jobs; something that the US economy badly needs.
Some economists warn that the increased wages may be passed on to the consumers by an increase in prices. This had lead to a lot of discussions and heated arguments all over USA.
I think it’s fair to pass on some of the burden of increased cost to the private firms by increasing the minimum wage as these companies have already been charging high prices from the consumers. Some of these private firms are fast food chain owners that have added to the obesity problem in US. The low wage workers buy fast food as they are lower in price to homemade food and easily accessible; increasing salary will mean healthier food options. On the other side some economists believe that increased cost may lead to unemployment in the long run, as firms may resort to using newer technologies that replace humans. They warn that the law of demand states that increase Labor cost will ultimately cause unemployment. Among all these fears and warnings the government has decided to go ahead with the increase.
I support the government’s decision as boosting economic activity the need of the hour. The US economy is demand starved right now and the middle class consumers are the true job creators. The reason behind consumers not spending is the dropping paychecks. Increased wages would definitely increase demand and then increase employment to push supply.