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I need this completed by Friday 7/12/19, it is supposed to give reasons using theories like GPD economic growth, aggregated demand, and aggregated supply, to give reasons why they should increase minimum wage.
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Should minimum wage be increased
Student’s name
ECON 2302-105
Instructor’s name
Date submitted
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A wage is a form of compensation to employees in terms of financial payments for the
labor they provided and their used time. It is offered as a salary for the quantity of work
performed by the employees or in return for their services. The prevailing wage rate is
dependent on the market forces since it is presumed a perfectly competitive market. Firms
stipulate the wage and the employees choose the stipulated wage for the specific job
description. Since the Great Depression, the federal minimum wage has been in effect.
Currently, the minimum wage has been a controversial issue. Why should there be a raise the
minimum wage? Others question if it should really exist. How can we balance the burdening
issue on small businesses with the worker’s needs? This paper examines the impact of
increasing minimum wage in the economy- looking into its effect on the GDP, aggregated
demand, and aggregated supply, inflation, economic growth, and unemployment rates
History of The Minimum Wage
On June 25, 1938, President Roosevelt signed a Law which stipulated the minimum
wage for workers, strengthening the Fair Labor Standards Act of 19381. The initial minimum
wage was $0.25 per hour (corresponding to $4.18 today) affecting more than 19.8% of the
whole labor force. According to the Bureau of Labor Statistics, it was found that 74.6 million
workers above the age of 16 received wages hourly. 4.7% or 3.5 million of this group comprised
of workers who received minimum wage or lower. Figure 1 illustrates the percent of hourly
workers, by gender and age, who received the minimum wage or lower in 2012
Figure 1
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Form the chart, it can be deduced that workers receiving the minimum wage tend to be
young and female. The greatest portion of workers receiving minimum wage or below are in the
category of leisure and hospitality industry (comprising 19%).
Impact of increasing the minimum wage on the economic growth and GDP
Advocates for a raise in minimum wage claim that any increments can act as a
propellant of economic growth and aid low-skilled persons amid slumps in the business cycle. If
a rise in minimum wage increases the earnings of low-skilled persons, they will tend to remain in
their job occupations. The pay rise will act a motivation, making them strive extra hard in their
responsibilities. However, the workers will have a higher marginal propensity to consume more
of their income and can lead to wage-push inflation. Conversely, a rise in minimum wage
improves the living standards of low-skilled persons thereby stimulating greater economic
growth. Low-skill...