In 1938, Franklin Roosevelt signed the Fair Labor Standards Act which set a minimum pay for all workers. At the time, the new minimum wage was 25 cents (equivalent to $4.10 now), which was supposed to be enough to live on.
The minimum wage has increased slowly through the years, and keeping with this trend, President Obama proposed further raising the minimum wage from $7.25 to $9.00 an hour. Such a notion would be the result of inflation of prices during this rough economic climate. This is called “indexing” minimum pay because it adjusts to the rising price of living. .
Being teenagers, the hike in minimum wage will hurt us the most. According to Walter Block at Loyola University, teenage unemployment increases by up to 3 percent for every 10 percent increase in minimum wage. Because, as teenage workers (unskilled and undeveloped workers), minimum wage jobs are the majority of jobs available to us.
Minimum wage is primarily focused on something called diminishing marginal product of labor. Kaighn Kevlin, Leesville alum and current Duke University student, explained this economic principle in a Facebook interview as “each worker contribut[ing] less value than the worker before him.”
If a hypothetical company hires only one worker, this one person is responsible for singlehandedly producing all of the company’s profit. But, if this same company hired 100 workers, each employee would produce a small fraction of the profit, unless profits went up for each added worker. When the company with 100 workers hired one more person, their labor would be unnecessary and would decrease each person’s marginal product. However, if that 101 person increases the company’s profit enough to justify their salary, the company would clearly benefit from hiring them.
When the same principle is combined with minimum wage regulations, one sees a reduction in employment. If all employees are paid equal wages, there comes a point where new workers are worthless to the business. When each worker receives a 10 percent pay increase, profits decrease. When the company reaps less profits, shifts will be cut and potentially workers as well, due to diminishing marginal product. Each additional worker per hour adds less value to the company if they are paid a higher minimum wage.
With 90 percent of workers being teenagers, Six Forks Cinema is a local example of potential effects of minimum wage increases. Dylan Thornton, manager, said, “We would have to cut hours.” He added that the proposed $9 minimum wage would “definitely make a big difference” in their business.
Some economists argue that higher pay increases the productivity of workers, but Thornton disagrees. “[Productivity would increase] a little bit, but I don’t think that would account for how much it’s raising,” he said.
Raising the minimum wage may also result in something called the ripple effect. Because minimum wage workers are often teenagers, they shop/eat/frequent minimum wage paying stores and restaurants. When teenagers’ shifts are cut, and they make less money, they will spend less money at other low-paying establishments, creating a cycle of less money and less workers.
The effects of this nearly 25 percent raise in minimum wage will ultimately hurt working teenagers the hardest. Those who are currently employed may face the possibility of shift cuts or even unemployment. And, for those adolescents seeking employment, such a task may be impossible with a strain on minimum wage employers.