Joanne N.
$2,000 Resolve to Evolve Scholarship Winner - Overall
"My God! Twenty-five cents an hour? Why all the fuss?" a New York magazine editor exclaimed after Franklin D. Roosevelt signed the Fair Labor Standards Act in 1938. Hoping to "end starvation and intolerable hours," laborers rejoiced as Roosevelt declared the Act to the nation. Their guaranteed hourly quarter would, as promised, save them from the standard of living of before. No more would poverty strangle the lives of so many! No more would they be suffering under low wages! Wage gap, be gone! However, little did they know that everything comes at a price.
Currently, the federal minimum wage is at $7.25. Although proponents of the minimum wage, primarily Senator Bernie Sanders in his attempt to raise it to $15, argue that an increase would decrease poverty levels, a federal minimum wage increase would tip the equilibrium wage level and result in adverse effects. The minimum wage should therefore be a left at its current level because raising the wage would result in unemployment and unnecessary burdens on both consumers and producers.
Unemployment caused by a federal minimum wage increase will hurt disadvantaged workers, such as the disabled, immigrants, teenagers, and minorities. Because the wage hike would lead to a more competitive labor market, employers would bid for more productive workers. Therefore, those with lower productivity would find fewer employment opportunities. "The real tragedy of minimum wage laws," stated Milton Friedman, a Nobel-Prize-winning economist, "is that...the people who are hurt most by higher minimums are the most poverty stricken." Joseph Sabia, Richard Burkhauser, and Benjamin Hansen, economic professors at San Diego State, Cornell, and University of Ohio, backs up Friedman's statement with their 2006 study that concluded that New York's $1.50 wage increase resulted in a 20.2 to 21.8% decrease in employment for less educated people, including teenagers and immigrants. The newfound competitiveness brought by a wage increase would hinder workers such as students, disabled people, and immigrants from procuring a job.
Not only would the federal minimum wage increase have perverse effects on the disadvantaged, but it would also lead to an excessive dependence on technology. This technology would save firms money and make businesses more efficient, therefore creating drastic long-term effects for employment. Although firms have been predicted to transition to technology in the long run, the minimum wage hike would create a speedier and more sudden transition. Mike Patton of Forbes Magazine confirms this speculation with numerical data: fast food places like McDonalds, Olive Garden, and Red Robin have already transitioned as such. Kiosks, Patton concludes, are $4000 - with a wage higher than $7.25, businesses will save $47, 502 a year with this technology. With the increase in minimum wage, it is not only economically sensible but also more efficient to replace human labor with technology. This technological transition is more rapid than the inevitable transition that firms are slowly coming to, and creates even more extreme effects for unemployment.
As James Dorn of the Cato Institute declared, "There is no free lunch." A federal increase in minimum wage would benefit laborers, but consumers will pay the price. The Law of Supply confirms this theory: when the price of a resource (in this case, the price of labor) increases, the price of supply will increase to compensate. This can be seen in Oakland, after the city's minimum wage rose from $9 to $12.50. The San Francisco Chronicle and East Bay Express reported 20% increase in prices from restaurants after this rise. A Purdue University study also resulted in similar developments: increasing fast food workers' wages to $15 will lead to a 4.3% increase in their products. One must remember a tradeoff when it comes to economics; the rising price of labor must be paid by someone. In this case, the burden will lay on consumers. This confirms the wage-price spiral: rising wages cause higher prices and vice versa.
As a prospective college student, raising the minimum wage would not only affect me via higher prices, but also inhibit me from procuring a job during my undergraduate years. My mother has often told me stories of her menial jobs in college as a fast food worker, part-time librarian, and Rite Aid cashier. With these jobs she has reduced her college debt by 25%. Although I wish to slash a quarter of my debt, this is impossible in 2015 dollars: not only has college tuition increased 13% in the past 5 years, but since an increase in minimum wage would force businesses to hire more productive workers, it would be more difficult for me to obtain a low-skilled job. Minimum wage jobs are supposed to be a stepping stone for higher-paid jobs, but low-skilled workers like myself are unable to reach this step if the wage is increased to such a magnitude.
"All our dreams can come true if we have the courage to pursue them," Walt Disney declared. But not even Disney predicted the increasing costs of dreams. My dream, for example, costs $31,365 a year to attend. UC San Diego, a world-renown public university, not only requires courage to attend, but also a large paycheck. With enough courage, however, I am certain that my university experiences will lead me to a brighter future. The screening effect, an economic theory that states that employers believe college completion results in a better job applicant, confirms the belief that college education equals financial security. Higher education, however, is not just of future finances; it leads to invaluable academic opportunities. As a public health advocate, I plan to pursue a public health major and do my part through activism to make a meaningful community impact. Through UCSD's public health program, I will be able to study abroad in third world countries to help the underprivileged while completing my studies. I am also able to play an integral role in government advocacy through internships provided by my college, which would help me reach my goals of universal health care.