Minimum Wage Increase, an Evaluation of Its Social

MINIMUM WAGE INCREASE, AN EVALUATION OF ITS SOCIAL

AND

ECONOMIC IMPACT

Yaquelin Barrera

A Policy Analysis Presented to the Faculty of the Department of Public Policy and Administration School of Business and Public Administration

CALIFORNIA STATE UNIVERSITY, BAKERSFIELD

In partial Fulfillment of the Requirements for the Degree of

MASTER OF PUBLIC ADMINISTRATION

May 2017

Yaquelin Barrera

2017

MINIMUM WAGE INCREASE, AN EVALUATION OF ITS SOCIAL

AND ECONOMIC IMPACT

Yaquelin Barrera

This thesis has been accepted on behalf of the Department of Public Policy and

Administration by their supervisory committee:

as R. Martinez, Ph.D. Date irst Reader

Jinping Sun, Ph.D. Date Second Reader

Dedication

This thesis project is dedicated to all the first generation college students. Everything is possible with commitment and determination.

“But you, be strong and do not lose courage, for there is reward for your work”

– 2 Chronicles 15:7

Acknowledgements

I would like to thank my Dr. Jinping Sun, Dr. Thomas Martinez, and Dr. Steven Daniels for all their hard work, dedication, and guidance over the last two years. Essentially without their support, thoughtful encouragement, and feedback, this project would have not been possible.

Table of Contents Abstract ...... ii Chapter 1 – Introduction ...... 1 Statement of Problem...... 3 Purpose of Analysis ...... 4 Importance of the Analysis ...... 4 Primary goal ...... 5 Definition of Terms ...... 6 Chapter 2 – Review of Literature ...... 14 Background ...... 14 The Law of Supply and Demand ...... 14 Keynesian Economics Theory ...... 15 Minimum Wage Evolution ...... 16 Minimum Wage Among the States ...... 19 Chapter 3 – Policy Analysis ...... 30 Cost of goods and services impact ...... 30 Private and public sector ...... 31 Income equality and inequality ...... 36 Chapter 4 – Summary ...... 39 Conclusion ...... 39 Implementation Recommendations ...... 39 Research Recommendations ...... 40 References ...... 41 Appendix A ...... 47 IRB Letter ...... 48 Minimum Wage Cartoon ...... 49 Keynesian Economics Theory Cartoons ...... 50 Supply and Demand Theory Chart ...... 51

Abstract When it comes to minimum wage it is a complex subject to grasp, since it affects

everyone and the economy as a whole. Even economist’s perspectives vary amongst them on the

effect that raising the minimum wage has on society. For example, some economist states that

many people have the misconception that when the minimum wage goes up that they will be

jobless. Meanwhile other economist argue that raising the minimum is essential, since it closes

the wide gap between the rich and the poor. It also gives them an opportunity to have higher

possibilities of living above the poverty line. Throughout the 51 states in the United States the

minimum wage varies in the sense that some states minimum wage is still at $7.25 an hour;

however, there are states that have their minimum wage as high as 15 dollars. It goes to show

that depending on the particular state that what may work for one may not work for the others.

This study analyzed the outcomes and impact of raising the minimum wage every year

until 2021 in California. Despite both sides point of view this analysis was to give an overview

of the causes and effects of minimum wage. Lastly, summative recommendations were made

based on the analysis. The following three essential outcomes were examined: the cost of goods

and services impact; private and public sector; and income equality and inequality.

Based on my analysis it is recommended that the minimum wage to continue to be increased as necessary as there were no studies or statist supporting the negative impact minimum wage has particular in the three outcomes: the cost of goods and services impact; private and public sector; and income equality and inequality that were examined. Conducting additional research for a general sample earning minimum wage would provide more accurate results and unbiased results. As of now, there is not enough unbiased study clarify such a huge impact these to variables have.

ii 1

Chapter 1 – Introduction Minimum wage is a standard rate by law employers are required to enforce. The primary of purpose of a minimum wage was to avoid child labor as adults being overworked and most importantly adults being under pay. Basically, the purpose of minimum wage is to set a standard rate for certain people to get paid hourly and sets standard overall working hours. It is against the law to pay your employees below minimum wage and make them work more hours without paying them “overtime”. Although minimum wage sets a standard hourly rate, many workers are still considered low-income since his or her annual income is not high enough. In addition, minimum wage workers believe they are being underpaid, which causes there to be a gap between being wealthy and poor. Although employees are earning minimum wage their annual income is below poverty. Having these families’ income below poverty wages leads to government assistance rates to increase as well. However, the majority of corporations and businesses such as retailers, supermarket stores, and so on consist of minimum wage employees that will significantly benefit from an increase in minimum wage. The increase of minimum wage is stated to have an overall impact on private and public sectors, social class, the cost of goods and services and so on.

People at or below minimum wage are the following: “disproportionately young 50.4% are aged between 16 to 24, 24% are teenagers between 16 to 19, 77% white, nearly half are white women, and lastly 64% of the total are largely part – time workers” (DeSilver, 2014, p. 1). The

Bureau of Labor Statistics reported in 2013, 1.532 million hourly workers earned the federal minimum of $7.25 an hour, which is 1.8 million more earned less than that because they actually fell under one of the several exemptions such as tipped, employees, full – time students, certain

2 disabled workers and so on that for a total of 3.3 million hourly workers at or below the federal minimum (DeSilver, 2014, p. 1). (See figure).

Figure 1: Federal Minimum Wage, 1938 – 2013

Source: Retrieved from Pew Research Center: Who makes minimum wage? By Drew Desilver,

2014

People at or below minimum wage are employed in industries and occupations such as

food preparation and serving associated occupations, sales, and associated occupations and

personal care and service occupation. The Bureau of Labor Statistics states 55% work in the

leisure and hospitality industry, 14% in retail, 8% in education and health services, which leads

to the rest being scattered among other industries (DeSilver, 2014, p. 1). See figure 2 below.

Figure 2: Minimum – Wage and Below Workers By Occupation as of 2013

Source: Retrieved from Pew Research Center: Who makes minimum wage? By Drew Desilver,

2014

Statement of Problem Every time minimum wages are increased there are people that argue that the increase will hurt the economy and most individuals, while other argue that increasing the minimum wage will help the economy and most individuals. The major concerns with minimum wage increase range from the effects on the cost of goods and services impact; private and public sector; income equality and inequality. But, all wages impact the cost of living as the worker’s pay raises the cost of products are affected as well. With this in mind, small businesses concern is not

being able to afford employees, which some consider this to be a “myth” and successful large

business such as Gap and Costco don’t need to worry about the increase because they are

currently paying their employees above $10.10. As increasing minimum wage will help several

families not live in poverty levels as well as not being on government assistance. These families

will be earning more money and have money to spend on cost of goods and services.

Purpose of Analysis This paper will analyze the outcomes and impact of raising the minimum wage every

year until 2021 in California. Then make summative recommendations based on the analysis.

The following three outcomes will be examined:

1) Cost of goods and services impact;

2) Private and public sector; and

3) Income equality and inequality

These summative recommendations strategies will be analyzed and compared according to the

following criteria:

• Cost of living impact, i.e. pros and cons;

• History repeats itself, i.e. compare with previous time minimum wage was increased

Importance of the Analysis The most significant value that dominated the decision to increase minimum wage was

that people that are employed full-time should not live in poverty. Also, NELP study discovered

that although people are employed they are forced to be on public assistance in order to afford

food, health care and so on (Dreir, 2014, p. 2). People cannot afford the cost living when the

minimum wage is low and causing them to be on government assistance. Indeed, there are

several people that are earning minimum wage but still need government assistance in order to survive.

The real value of minimum was reached its highest in 1968, peeking at approximately

56% of the average hourly wage (Whitaker, Herian, Larimer, & Lang, 2012, p. 5). After this, the actual value battered primarily to inflation and irregular nature of federally mandated increases.

In particular, by setting a nonmarket-determined wage floor, minimum wages increase prices and decrease profits, which influencing the reducing demands for goods and services. Reducing demands for goods and services results in layoffs or another cutback that disproportionately disarm low-skill workers (Whitaker, Herian, Larimer, & Lang, 2012, p. 5). Certainly, this doesn’t mean other states such as Alabama, Mississippi and so on that have low wages have healthier economies and those earning low wages in those states are better off in states with high wages such as California and New York.

Primary goal The primary goal of increasing minimum wage is to help people get out of poverty and

help them achieve the American dream. Not only achieve the American dream but also most

importantly not be living in poverty. John Boehner, United States Representative Ohio

Republican emphasizes the goal of increasing minimum wage is to “help them climb that ladder

so they can live the American dream” (Sick, 2013, p. 20). The most compelling evidence is a gap

between the wealthy and poor, which has not been reduced. Helping people climb up the ladder

to achieve the American dream can possibly help reduce the gap, while the same time helping

them improve their lifestyle.

Definition of Terms The following terms will be clarified as these terms play an essential role in this

evaluation: small business, poverty, income equity, freelance contract work, independent

contractor, employee, free market economy, inequity, and lastly minimum wage earners.

Small business is referred to an independently owned and operated company, which is limited in size and in revenue depending on the industry. In general, a small business can consist

up to 1,500 employees (Cooper, 2012, p. 1). Several people assume the term “small business”

refers to a mom and pop business, which has less than 20 employees. However, the Internal

Revenue Service defines a small business as having assets under 10 million. Also, a major factor

is an industry for the small business size; such a gardening business can consist of 5 employees

or 500 employees. The majority of small business pays their employees minimum wage, once

again depending on the industry employee salaries vary.

Unlike small business, freelance contract work allows an individual to be working on a

contract with more than one company at a time rather than working for a single company ("What is freelance? definition and meaning"). These individuals are referred to as freelancer or independent contractors due to the matter being considered self-employed and having the option to pick the companies they would like to work with. Also, they set their own pay salary versus working at an organization where their pay is already determined. Usually, the method freelancer use is comparing their rate with the market and tries to give a better rate to increase. In addition, independent contractor salary depends on other competitors, as they need to have the best price to have more customers and mange dto stay in business. For instance, a small business prefers an independent contractor to do their booking once a month, due to not being enough work to make this a full – time position in their organization. The independent contractor would voluntarily take this job as he or she can negotiate the salary and hours needed to complete all booking once

7 a month. Lastly, companies often use freelance workers as a way to avoid paying fringe benefits because it is a required to pay fringe benefit for employees.

The term employee is referred to an individual that receives no compensation or is paid expenses reasonable benefits or a nominal fee to perform services for which the individual volunteered but this individual is employed to perform for an agency (Fair Labor Standards Act,

2011, p. 7 – 9). An employee does not have much flexibility an independent contract would regarding control of what projects to take over and being their own boss as the employer has more control of the employee. To clarify the difference between an employee and independent contractor would be a employer controls and determines the hours and means of production (Hire a Contractor or an Employee? | The U.S. Small Business Administration). An employee is given the task for a particular project to be done and only works for one employer. An employee is schedule to work 5 days a week cooking at a restaurant, while an independent contract helps strength the operation of the restaurant working 2 days a week.

Income equity is the “revenue streams from wages, salaries, interest on savings account, dividends from shares of stock, rent, and profits from selling something for more than you paid for it” (Priester & Mendelson, p.1). Certainly, income equity refers to the magnitude, which income is dispersed in an uneven manner among the population. John Tamny editor of Real

Clear Markets for Prager University, states income inequality is a good thing when it is the product of a free market economy. Another key point the free market economy is allowing individuals to become wealthy making what the rich enjoy today into something almost everybody can enjoy tomorrow (“Income Inequality is Good, 2016). The growing income inequality in the U.S., only the top 1-10% of the population have seen any real income growth in

20 years, it is because the bottom 90% of people can not grow as fast as the economy and be part

8 of the top ten percentage. As forced equality would actually mean there are fewer opportunities to pursue what makes an individual great. With this in mind Reagan and Bush reduced taxes on the wealthy to boost Supply Side “trickle down” theory, but, only the top 1-10% benefited.

Massive Federal Deficits were left behind. Therefore, only Clinton & Obama were successful to lower the Federal Deficits. Obama was able to decrease the deficit by $1 trillion, which is 2.5% decrease the deficit (Benen, 2016, p. 1). As a result, the supply side is a theory that works for the top 10%, but not for the remaining 90% of the population.

Unlike income equity, inequity is an unfair circumstance, lack of unfairness, and favoritism (Inequity, 2010, p. 1). For example, a huge share of the nation’s economic growth for several years has gone to the top one – hundredth of one percent (Gilson & Perot, 2011, p. 1). In addition, the richest 10% controls 2/3 of American’s net worth as top one percent controls

34.6%, top one to ten percent controls 38.5%, and lastly the bottom ninety percent only controls

26.9%, which is dramatically low being ninety percent of the bottom (Gilson & Perot, 2011, p.

1). Please see figure 3, which is the most up to date data from 2007.

Figure 3: Who Controls American’s Net Worth?

Source: Retrieved from Mother Jones: It’s the Inequality, Stupid By Dave Gilson and Carolyn

Perot, 2011

As you can see in Figure 4, such positions executives, and mangers in non – finance

departments are part of the top one percent of income. Furthermore, the following job are not

part of the one percent of income but play an essential role in the economy: gardeners, farm

workers, car wash employees, cook, housekeeping and so on.

Figure 4: Who is the 1% by occupations of taxpayers?

WHO ARE THE 1 PERCENT? OCCUPATIONS Of TAXPAYERS IN TOP I PERCENT Of INCOME

Executives, managers, supervisors ___.. 31.0% (nonftnance) ___

Medical ____. ~s-7"-

Financial professions .....---..I 13·9"

Lawyers

Computers, engineering, techincal

Not working or deceased

Skilled sales

Blue coll ar/service

Real estate

Business operations (nonfinance)

Entrepreneurs

Professors and scientists 1.8%

Arts, media, sports 1.6%

Unknown

Government, teachers, social 0.8% services

Farmers and ranchers

Pilots Io .>%

Source: Retrieved from Mother Jones: It’s the Inequality, Stupid By Dave Gilson and Carolyn

Perot, 2011

One of the most important terms for this evaluation is poverty. Poverty is the condition of

basic needs such as food, clothing, and shelter are not met and can’t afford (Poverty, 2017, p. 1).

In other words, poverty is when people cannot enjoy a certain minimum level of living standards

determined by the government and these certain minimum level of living standards are met by

the majority of the population. Although this may be true some individual are unemployed, while

others are employed but are living in poverty.

The Office of Management and Budget’s Statistical Policy Directive 14, the Census

Bureau has their own measure to determine who is in poverty. By all means “the official poverty

definition uses money income before taxes and does not include capital gains or noncash benefits

such as public housing, Medicaid and food stamps (Bureau, p.1). The income used for the

calculation of poverty status before taxes are unemployment compensation, public assistance,

earnings, social security, and pensions or retirement income and so on. The actual calculation

would be the total income of the family subtracting the threshold (Bureau, p.1). If the total

income is greater than the poverty threshold they are not considered in poverty and if the income

is less than the poverty threshold they are considered in poverty. Likewise, every year the

Department of Health and Human Services (HHS) updates poverty guidelines and the Census

Bureau updates poverty threshold (Poverty Guidelines, 2017, p. 1)

Significantly there are several factors why many individuals and families are below and/or at the poverty level. Sadly most poor families in California are not unemployed, they are working families. The official poverty statistics states as of 2014, 78.9% of poor Californians

lived with at least one working adult excluding families made up only of adults age 65 and older

(Bohn & Danielson, 2017, p. 1). In addition, 55.1% that are in poverty at least one family

member works full – time (Bohn & Danielson, 2017, p. 1). Figure 5 shows more details.

Figure 5: An estimate from 2012 – 2014 of poverty rates across California’s counties

Source: Retrieved from Public Policy Institute of California: Poverty in California By Sarah

Bohn and Caroline Danielson, 2017

As shown above, the top three California’s countries with poverty rate are Los Angeles

25.6%, Santa Barbara 25.4%, and Lake, Mendocino 23.9%. It is stunning Kern County is not part of the top three countries with the highest poverty rate.

Minimum wage earners range from high school students, college students, people seeking just a part – time employment and/or people seeking full – time employment. A few of the skills that are acquired through minimum wage job are the following: providing good customer experience, being prompt on delivering results, manage money responsibility and most important

13 how to work well on a team (“How Does the Minimum Wage Work”, 2016, p. 1). Furthermore, the skills mention above is not limited to the only skills acquired as a minimum wage earner.

Minimum wage earner range from entry-level jobs to farmworkers, housekeeping employees, and many other jobs that the majority of the time not recognized but the highest proportion of minimum wage earners are found retail, agriculture and service industries (Minimum Wage

Wars, 2005, p. 1). Correspondingly, most important minimum wage earners range from different occupations and ages.

Chapter 2 – Review of Literature Background The evolution of minimum wage in the United States began in 1888; congress established

the Bureau of Labor under the U.S. Department of the Interior. Four years later the Federal

Government adopts an eight-hour workday as well as other wage-and-hour standards for

employees. In 1892, adopting an eight-hour workday created a huge impact in the workforce as

this improved the structure in the workforce environment. However, establishing an eight-hour

workday was not enough, so in 1916 Owen-Keating Act established a minimum age limit of 15

for works in factories, which consisted of a 48-hour workweek – eight-hour workday (Fair Labor

Standards Timeline, 2013, p. 1). By establishing this act it set standards to the age limit and prevented young children to be exploited for their labor. When it comes to these stipulations they all vary on what their specific point of view that help gives a better understanding to tackle these issues, such as the law of supply and demand theory and Keynesian Economics theory.

The Law of Supply and Demand The law of supply and demand is known as a fundamental principle governing an

economy. This economic theory, the law of supply and demand is where supply increases the

price will tend to drop or vice versa and the demand increase the prices will tend to increase or

vice versa (Adam, 2009, p. 1). This theory instinctively grasps the correlation of goods and

services against the demand for those goods and services. Furthermore,

“As wage rise, the supply of goods and services is reduced, because wages are the input

prices of labor. Labor accounts for about two-thirds of all input costs, and thus wage

increase create supply reduction – a higher price is necessary to provide the same

quantity – for most goods and services “ (McAfee, Lewis, & Dale, 2009, p. 19).

In addition, the costs of material course increase the price goods using that material, such an increase of $1 in the price of a 42 – gallon barrel of oil increases the price of gasoline with an estimate of two cents“ (McAfee, Lewis, & Dale, 2009, p. 19). Basically, the increase in rates increases the cost of production and tends to decrease the supply of goods.

The laws of supply and demand also emphasize an increase in the price of a supply – substitutes reduce the supply of a good making the alternative good more attractive to the supplier. In other words, making the product less valuable the returns to investing in a good are reduced. Therefore, when the price of electricity rises, people don’t replace their air conditioners and refrigerators with the most modern energy – saving models right away “ (McAfee, Lewis, &

Dale, 2009, p. 25). Also, people react differently to temporary and permanent changes. The similar concept is with raising the minimum wage. Moreover, Keynesian Economics theory gives a different perceptive.

Keynesian Economics Theory John Maynard Keynes, an economics developed the Keynesian Economics theory during the 1930s as a method to understand the Great Depression (Staff, 2013, p. 1). Keynesian economics theory clarifies the cause of long – term unemployment. An important point of this theory would be “the short run cannot necessarily be inferred from what must appear to be a long run and currently live a short run. As Keynes encouraged increase government expenditures and lower taxes to stimulate demand and pull the global economy out of the Depression (Blinder,

2008, p. 1). As a result, Keynesians suggested certain periods of recession and/or depression are economic problems not as in real business cycle theory efficient market responses to unattractive opportunities. This theory was known for the concept of optimal economic performance, which would be achieved, and economic slumps would be prevented through accumulated demand through economic intervention policies by the government. Keynesian Economics theory

16 hypothesis was if cumulative demand in the economy fell, leads to weakness in production and jobs that precipitated a decline in prices and wages. Also if there was a lower level of inflation and wages that lead to encourage employers to make capital investments and employ more people, stimulating employment and restoring economic growth (Staff, 2013, p. 1).

Keynesian suggested that prices, and essentially wages respond slowly to changes in supply and demand resulting in periodic shortages and surpluses – i.e. labor. Another example would be if government spending increases all other components of spending remain constant the output would increase (Blinder, 2008, p. 1). In addition, Keynesians doesn’t think there is an ideal typical level of unemployment because unemployment is subject to the impulsive cumulative demand due to believing the price adjusts only gradually (Blinder, 2008, p. 1).

Lastly, Keynesians identified unemployment as both too high on average and too variable as demanding theoretical justification for these positions is hard to come by.

Minimum Wage Evolution In between 1916 to 1935 Congress passes the following laws: minimum wage law to protect women and minors working in the District of Columbia, established wage standards for employees engaged in contract work, and lastly, congress passed the National Industrial

Recovery Act (NIRA). Also, another important year in the evolution of minimum wage was in

1936 because congress passed the Walsh-Healey Act. The Wash-Healey Act demanded individuals employed by a Federal contractor to follow the requirements:

1. Be paid not less than the minimum wage

2. Not be permitted to work in excess of eight hours in one day or more 40 hours

in one week

3. Not employ any male under 16 years of age or female under 18

4. Not employ any convict labor (Fair Labor Standards Timeline, 2013, p. 1).

The Wash-Healey Act four major requirements influenced a dramatic impact for the contractor. This prevented contractors to overwork their employees as well as employing underage males and females. In addition, the Fair Labor Standards Act (FLSA) became the basic

Federal image overriding minimum wages, working hours, equal pay, and child labor (Fair Labor

Standards Timeline, 2013, p. 1).

A few years after the Wash-Healey Act, the Fair Labor Standards Amendments made adjustments to overtime provisions to increase the minimum wage rate to $0.75 an hour, which went effective in 1950. Also at the same time this extended child labor coverage and gave the

Labor Departments Wage and Hour Division authority to supervise the payment of back wages due to employee. In other words, Labor Department Wage and Hour Division played a key role to impose the payment of back wages due employee. Once again minimum wage was raised to

$1.15 in 1961 and by 1964 minimum wage was $1.25. However, two years after Small Business

Job Protection Act increased the minimum wage rate to $4.75 and the following year minimum wage increased to $5.15.

In 1972, Congress established minimum wages for employees of public and private schools. Basically, it took Congress thirty-six years after the Wash-Healey to consider the importance of establishing minimum wage specifically for employees of public and private schools. Eventually, the Equal Employment Opportunity Commission was given the responsibility for enforcing the Equal Pay Act (Fair Labor Standards Timeline, 2013, p. 2).

In 2007, the Fair Minimum Wage Act amends the Fair Labor Standards Act to gradually raise the Federal minimum wage over three years in three increments: to $5.15 per hour to $6.55 per hour, and eventually to $7.25 per hour as of July 24, 2009 (Fair Labor Standards Timeline, 2013, p. 2).

In 1974, comprehensive amendments to the FLSA increased the minimum wage rate to

$2.00, and by 1976 an increase to $2.30. In addition, to extending the minimum wage to Federal

State, and local employees, which lead to later, the Supreme Court declaring it is unconstitutional (Fair Labor Standards Timeline, 2013, p. 2). Eventually, the Equal Employment

Opportunity Commission received full responsibility to enforce the Equal Pay Act.

Next Congress passes Fair Labor Standard Amendments to provide guidelines for overtime compensatory time off for certain public agency employees and to rationalize the application of FSLA to volunteers. The Supreme Court setbacks their earlier decision and restores the full application of FLSA to State and local government employees (Fair Labor

Standards Timeline, 2013, p. 2).

Minimum Wage Overview: Provisions of the Fair Labor Standards Act, states the Federal

Labor Standard Act included several subminimum wage rates such as employers may pay lower wage rates to tipped employees; the worker with disabilities; new hires under age of 20; full-time students who work in retails or services establishments. Agriculture, or institutions of higher education, and high school students who are at least 16 years of age and enrolled in a vocational education program. In addition, section 14(c) of FLSA explains employers may pay special minimum wages (SMW) to workers with disabilities with the purpose of providing an individual with disabilities the opportunity to work. Disability may be physical or mental, which may be related to age or an injury but not limited to blindness, mental illness or retardation, alcoholism, and lastly drug addiction. The reason why it is possible to pay a disable worker less than the basic minimum wage, the employee’s disabilities must impair his or her productive capacity in the job being performed (Minimum Wage Overview, 2013, p. 3).

Minimum Wage Among the States As of July 24, 2009, basic minimum wage was $7.25 but as of January 1, 2012, 18 States and the District of Columbia had minimum wage rates that were higher than the Federal minimum wage. As of today, the minimum wage is currently $10.50 per hour and will increase

to $11 per hour by 2018. The minimum wage will be increasing every year until minimum wage

reaches $15 per hour, which is stated to be in 2021.

As of January 2016, 14 states raised their minimum wage, which leads to increasing

wages for over 4.6 million workers across the country (Kimball. 2016, p. 1). This increase in

minimum wage represents an essential boost to the spending power of low – wage workers and

their families. Meanwhile, Colorado and South Dakota changed to a process adopted by 15 other

states, which the minimum wage is automatically adjusted each year to match the increase in

prices – inflation indexing. Now some states are not waiting for the federal government to act,

which is good as more states raise their wages (Kimball. 2016, p. 1). California was one to the

seven subs – state localities to increase minimum wage such as Mountain View, Oakland, Palo

Alto, Richmond, and lastly Santa Clara. Ultimately the two other sub – state localities were

Portland, Maine, and Seattle, Washington. Refer to figure one with more details of states that raised their minimum wage as of 2016.

Figure 1: States with minimum wage increase as of January 2016

Source: Retrieved from Economic Policy Institute: 14 states raised their minimum wage at the beginning of 2016, lifting the wages of more than 4.6 million working people By Will Kimball,

2016

Figure 2: In 2014, states that increased minimum wage vs. not increasing minimum wage

Percentage Change in Ernployrnent by state End of 201 3 to Beginning of 2 014 • 1 3 States Whiched Raised Minimum in 2014 • States W ithout Minimu m W age Increase californi a 2 .95 Nevada 2 .82 W ashington 2.10 COlorado 1.79 Utah 1.75 Oregon 1.6-8 North Dakota 1.64 T exas 1.63 Florida 1 .56 Oklahoma 1 .,32 Rhode I sla nd 1.28 M assacta us ·etts 1.27 Missouri 1.16 Ohio 1.16 NeN Hampshir e 1.08 District of COlumbia 1.05 Alaska 0.99 Nebraska 0.98 Delaware 0 .96 Arizona 0.91 T ennessee 0 .89 South carolina 0.8 4 Alabama 0 . 78 Monta na 0.78 Minnesota 0.72 W isconsin 0.71 M aine 0.69 Wyoming 0.62 Haw a ii 0.57 N e w York 0.5-4 Georgi a 0.50 North carolina 0 .49 Iow a 0.45 V erTnont 0.35 I d a ho 0.28 Kansas 0 .27 Arkansas 0 . 26 Indiana 0 .23 Mid-ligan 0 . 19 Cbnnecticu t 0.11 Pennsylvania 0.10 New Mexico 0.03 Maryla nd South Dakota W est V irginia Virgin ia Illinois - o. 13 Louisiana -0.15 Kentucky -0.28 NewMiss Jissippiersey r-0:_Q·~0~-~4~S. 56 ~:iiii~---.,.---.,.----.---.,.----.----, - 1 - 0 .5 0 0.5 1 1.5 2 2.5 3 P e rcent C h ang e in Empl oyme nt: Aug-D·ec 2013 to Jan - M a y 2014 http://cepr.n e t Sour ce: Bureau of Labor Stati stics

Source: Retrieved from Center for Economic Policy Research, 2014

As shown in figure 2 the following states increased the minimum wage either through

legislation or through automatic increase related to inflation: Arizona, Connecticut, Colorado,

Florida, Missouri, Montana, New Jersey, New York, Ohio, Oregon, Rhode Island, Vermont, and lastly Washington (Kagel, 2015, p. 1). Due to minimum wage increase the state mention above notice an “average change of .99% compared to the first 5 months in 2013, which saw an average change of .68% (Kagel, 2015, p. 1). Furthermore, this sate saw employment increase, which is always a good thing for families and the economy. These 13 states confirm increasing minimum wage doesn’t have a negative impact and increases the unemployment

Apparently in those states increasing minimum created more job as it threw a “wet blanket” on the argument that minimum wage increases are detrimental (Kagel, 2015, p. 1). The

Department of Labor displays increasing minimum wage didn’t have a negative impact in some states (Neuman, 2014, p. 1). In particular, California saw 2.95% increase in employment in 2014

(See Figure 2). Correspondingly, “Economists who support a higher minimum say the figures are encouraging though they acknowledge they don’t establish a cause and effect”(Neuman, 2014, p.

1). In other words, depending on the state there is hiring, which in this case hiring was accelerated in Arizona, Connecticut, Colorado, Florida, Missouri, Montana, New Jersey, New

York, Ohio, Oregon, Rhode Island, Vermont (Covert, 2014, p. 1).

In particular those thirteen state notice employment growth, this does not mean that increasing minimum wage essentially create more jobs (Covert, 2014, p. 1). Ben Wolcott states in his analysis “while this kind of simple exercise can’t establish causality, it does provide evidence against theoretical negative employment effects of minimum – wage increase” (Covert,

2014, p. 1). Basically, Wolcott is explaining that higher minimum wages do not hurt employment growth as so many people assumed. Reinforcing Wolcott state Washington has the highest minimum wage while; they also notice the biggest increase in a small business job (Covert,

2014, p. 1). Lastly, although economist has studied state – level minimum wage increase for

23 more than ten years they have not found any conclusive evidence regarding the raises impacted job creation.

Specifically, 5 states have not adopted a state minimum: Alabama, Louisiana,

Mississippi, South Carolina and Tennessee (“United States Department of Labor, 2017, p. 1). In particular, Louisiana rejected proposed legislation to enforce a minimum wage of $8.25 an hour.

Secondly, Tennessee’s U.S. Senator Lamar Alexander “prefers to abolish the whole notion of a minimum wage and replace it with a higher earned income tax credit (Ausick, 2014, p. 1). Indeed business owners and lobbyists prevailed with their arguments that businesses such as restaurants and retails operate on thin margins, which is why they cannot afford to pay more for employee’s credit (Ausick, 2014, p. 1). Lastly, their argument to not have a minimum wage is to raise the price of cost and goods would threaten their sales and/or cause of layoffs.

Unlike these five states, there are four other states: Arkansas, Georgia, Minnesota, and

Wyoming with the lowest minimum wage. Every state has their own argument why they have no minimum wage at all or have the lowest minimum wage or highest. To put it another way, “the salience of minimum wage laws varies over time, yet partisans on both sides remain equally entrenched in their positions (Whitaker, Herian, Larimer, & Lang, 2012, p. 1). Some people want to reduce the wage as a way to prevent unintended consequence such as job loss, while other supporters want wage increase to enhance the spending power of low-income individuals. In

2006, this debate raged nationally, specifically in the American states as entrenched protagonist offered the staid justification that suggested the policy was bound to partisan politics. Therefore,

Democrats included a minimum wage increase as part of their 100-Hour Plan, which was passed in May 2007 (Whitaker, Herian, Larimer, & Lang, 2012, p. 1-2). Everybody has his or her explanation why the minimum wage should increase or should not increase.

The book the New Economics of the Minimum Wage is known for having a well-defined connotation of the new minimum wage research. In this research the detailed review of the studies consisted of variety of methods and databases, which examine restaurants workers, retail employment, teenagers, which concluded to the following “The weight of this evidence suggests that it is very unlikely that minimum wage has a large, negative employment effect (Schmitt,

2015, p. 3). This study conclusion was there would not be a negative employment effect as the myth has specified otherwise. Keeping this mind, this study was not biased as it focused on the majority individuals whom actually are minimum wage earners. Although this proved there is no negative effect specifically in employment some states still don’t want to increase their minimum wage. However, another study was conducted to evaluate who benefits from minimum increase and what was the impact.

A more recent study conducted in 2016 by John W. Lopresti and Kevin J. Mumford addressed the question of how a minimum wage increase affects the wages of low- wages workers comparative to the wage the worker would have if there had been no minimum wage increase. John W. Lopresti and Kevin J. Mumford data time frame was from 2005 to 2008, due to a large number of state – level minimum wage increases of various sizes. Fundamentally this study results indicated that low – wage workers who experience a small increase in the minimum wage inclined to have lower wage growth than if there had no minimum wage increase (Lopresti,

& Mumford, 2016 p. 12). Those who experience a large increase in minimum wage not only increase their minimum wage, which they previously earned less but also spills over to workers with moderately higher wages (Lopresti, & Mumford, 2016 p. 13). However, their study found little evidence of heterogeneity in the effect by age, gender, income, and race.

The way Lopresti and Mumford prevented their study to be unbiased, however, the size of the minimum wage increase had to be “as good as” randomly assigned conational on the controls. There was no clear pattern that emerges in the characteristic of state –year observations across the different groups defined by the size of the minimum wage increase (see figure 3 – columns 1 to 6). Secondly, there was no statistically noteworthy connection between the size of the minimum wage increase and the prior year’s state GDP growth rate, unemployment rate, price level or poverty rate (Lopresti, & Mumford, 2016 p. 7). Additionally, no factors were identified to drive the size of minimum wage increase in this particular view of their support for their statement.

Figure 3: Minimum wage changes by several variables

WHO BENEffiS FROM A MINIMUM WAGE INCREASE? 1175

Table 1. Summary Statistics

Minimum wage change

(1) (2) (3) (4) (5) (6) Variables Full sample No change :::; 5% 5%- 10% 10%- 20% > 20%

Observations 101,299 36,837 16,406 8,244 29,453 10,359 Mean wage 19.33 18.94 19.49 22.17 19.41 18.14 Percentage employed 100 100 100 100 100 100 Sex Male 51.83 51.67 51.18 51.84 52.21 52.13 Female 48.17 48.33 48.82 48.16 47.79 47.87 Race White 83.58 83.27 86.89 77.32 81.67 90.08 Black 10.2 10.95 8.18 8.84 11.76 6.87 Hispanic 11.85 10.55 11.1 18.58 13.58 7.1 3 Education Less than high school 8.76 9.15 7.23 8.89 9.55 7.17 High school only 47.62 47.54 48.18 41.58 47.44 51.94 Associate's degree or more 43.61 43.31 44.59 49.53 43.01 40.88 Age 1 ~19 2.68 2.87 2.23 2.46 2.59 3.16 20-24 6.73 6.73 6.23 6.97 6.76 7.1 5 25-34 20.05 20.14 19.13 19.91 20.47 19.95 35-44 26.16 26.1 3 26.36 27.46 26.2 24.94 45-54 27.43 27.54 28.07 26.7 27.13 27.62 65 + 16.95 16.6 17.06 16.6 16.85 17.18 Family income Low 6.88 7.49 6.71 5.08 6.87 6.45 Low-mid 18.92 18.86 19.07 15.66 19.19 20.35 Mid 20.78 21.23 21.46 18.63 20.15 21.75 Mid- high 30.85 30.71 31.82 28.94 30.38 32.68 High 22.57 21.71 20.95 31.7 23.42 18.77

Notes: The following individuals have been removed: those earning a wage more than $ 0.10 below the minimum wage, those earning an hourly wage greater than $100, those experiencing a wage change greater than 1,000%, those listed as self-employed and agricultural workers, and individuals younger than 16. Low-income families are defined as those with an annual family jncome of less than $20,000. Low-mid income includes families earning between $20,000 and $40,000 annually. Mid includes families earning between $40,000 and $60,000 annually. Mid-high includes families earning between $60,000 and $100,000 annually, and high includes families earning at least $100,000 annually. Individuals are weighted by sample weights included in the CPS.

Source: Retrieved from Who Benefits from a Minimum Wage Increase? By John W. Lopresti and Kevin J. Mumford, 2016

Economist explicates in the last thirty years in the US, the number of college – educated people living in poverty has doubled from 3% to 6% and during the same time the number of people living in poverty with a high school degree has risen dramatically from 6% to 22%

(“Income and Wealth Inequality, 2015). Although salaries of college graduates constantly are growing after adjusting for inflation, high school graduates incomes have dropped. As mention above, those with education and minimum education are still noticing an increasing in poverty rather than a decrease.

The question is not if income inequality exists, but rather if income inequality is actually a problem. One agreement is that the data suggest, “the rich are getting richer and the poor are getting poorer” (“Income and Wealth Inequality, 2015). The dilemma is that all groups are making more money, but the rich’s share is basically growing faster than others. This analogy provides a clear understanding:

“You own an apple tree and we pick 10 apples. You keep 6 and give me 4. A week later

we pick 20 apples, you take 15 and give me 5. So my share of the total went down from

40% to 25% but each of us still got more apples” (“Income and Wealth Inequality, 2015).

Basically, people in the lowest income have earned a little more income but the average income has still managed to fall behind. Unlike the lowest income people, the rich continually manage to gotten richer. Therefore, some economists consider income inequality in the US is creating more harm rather than helping people. Some economist believes a possible solution to reduce the gap in income inequality would be education, while other economists suggest an increase in minimum wage.

Increasing minimum is one solution to reduce poverty. Although there is no statistically significant improvement in poverty rates from 2012 to 2013, there was .50% decrease between both years. Actually low-income and middle-income workers have not seen income growth over the past few years, while the wealthiest have seen a dramatic economic growth (Vallas , &

Boteach, 2014, p. 1). Looking back into time, in 1960s an individual earning minimum wage would lift a family of three out of poverty in the United States (Vallas , & Boteach, 2014, p. 1).

Comparing today’s current federal minimum wage not only to Barack Obama and several other members of Congress state that 4 million American will be out of poverty.

Figure 4: Demonstrations current minimum wage and future increases by state

California is part of the top 5 states, which currently have the highest minimum wage as of

January 2017.

Current minimim wage, Future increases incuding 2017 raises already approved J, J, - District of Columbia $11.50 1 Massachusetts 11.00 I Washington 11.00 I California 10.50 I Connecticut 10.10 I Arizona 10.00 I Vermont 10.00 =l ~ 1 Alaska 9.80 l States in bold Oregon 9.75 increased in 2017. J New York 9.70 I Rhode Island 9.60 I Minnesota 9.50 I Colorado 9.30 Hawaii 9.25 I Maine 9.00 I Nebraska 9.00 I Michigan 8.90 I Maryland 8.75 West Virginia 8.75 South Dakota 8.65 Arkansas 8.50 ~ New Jersey 8.44 Delaware 8.25 s Illinois 8.25 Nevada 8.25 . ~ Montana 8.15 Ohio 8.15 s Florida 8.10 Missouri 7.70 ? New Mexico 7.50 J

0 $7.25 $15 Federal minimum

The New York Times 1 Source: Economic Policy Institute

Source: Retrieved from Economic Policy Institute, 2017

Chapter 3 – Policy Analysis Minimum wage is a public problem, several working people are earning minimum wage and those not earning minimum wage are affected by an increase. Although the majority of

Americans voted for a minimum wage increase in California, as they believe it is necessary for the increase to be implemented. However, they are earning minimum wage but their annual income is below poverty verges. By earning the minimum wage you would assume they would at least not consider being below poverty verges, especially because they are employed.

Cost of goods and services impact The most common myth regarding minimum wage is the following “increasing the minimum wage is bad for the economy” (Hoar, 2016, p. 1). Many people believe increasing will increase the cost of goods and services leading to a negative impact on the economy. Although this might be true, this is not true because since 1938 the federal minimum wage has been increased 22 times (Hoar, 2016, p. 1). In the 22 times, minimum wage has been raised the cost of goods and services were impacted slightly impacted by increasing the cost. The cost was increased at the same time as minimum wage this didn’t dramatically affect the economy. With this in mind, the real Gross Domestic Product per capita has progressively increased for more than 75 years, although minimum wage has been raised by the government’s practice (Hoar,

2016, p. 1). Lastly, advocates view the policy as necessary on the grounds that it provides financial assistance for the working poor (Whitaker, Herian, Larimer, & Lang, 2012, p. 5).

Another opposing agreement is “By setting a nonmarket-determined wage floor, minimum wages increase prices and decrease profits”, which leads to reducing the demand for goods and services and resulting in layoffs or other cutbacks that disproportionately harm low- kill workers (Whitaker, Herian, Larimer, & Lang, 2012, p. 5). Basically, there are inefficient and restrictions with the naturally evolving marketplace.

Private and public sector The Employment Polices Institute used the Census Bureaus data to estimates 223,000

unions members in California will receive a directly pay bump due to minimum wage increase

(Hoar, 2016, p. 3). This directly pays bump will influence a good amount of employees to be

loyal at their current employment because salary increase is one of the major motives why

people decide to stay at a job. The most affected employees are from four industries such as

education, health care, public administration, and retails. Therefore, taxpayers will help fund pay

raises for 45% of affected employees that work in the public sector.

Likewise, small business employees will not have the same luck as public sectors to gain

a directly pay bump due to the wage increase. As wages increase the labor and industries

insurance cost increase due to the correlation between the wages. Essentially, “several small

business in the area and there is not a single one who is making tons and tons of money to absorb

these costs.” (Alexander, 2015, p. 2). Reinforcing Alexander state small business doesn’t make a lot of revenue as opponents will use this as an argument, why the minimum wage is not beneficial. However, 60 % of small business owners acknowledge their business will benefit with the increase of wage (By Cap Action War Room / Think Progress, 2014, p. 1). Although the cost of goods and services will slowly increase as wage do, this allows individuals to have more money to spend. The law of supply and demand clarifies this more into details.

Wages are set by supply and demand; such as if many workers willing to do a job for a great amount of time there would be a high supply of labor for that specific job. On the hand, if few people need that particular job completed there is a low demand. Growing Gap Between

Rich and Poor states, “When there is high supply and low demand for a job, it results in a low wage. Conversely, if there are low supply and high demand as with particular highly skilled hob,

32 it will result in a high wage”. This is a perfect example of how increasing minimum wage will have an impact. Lastly, the gap in wages yields inequality between different types of workers.

By increasing, minimum wage leads to bias in free market economies due to the supply and demand theory. As a matter of fact, “Businesses have a demand for employees and attempt to fill this demand from the available supply of individuals in the economic marketplace” (Vitez,

2016, p. 1). By raising the minimum wage it does not only affect the employees but the economy. Businesses will always try to look for an alternative when faced with these issues such increasing the cost of goods, wage increase while trying to cut even and/or make revenue.

Successful businesses and/or big businesses such as Gap, Costco, and so on will dramatically affect by the increase of minimum wage since their employees already earn above minimum wage (By Cap Action War Room / Think Progress, 2014, p. 1). As these companies have already cope with higher wages and manage to stay in business although with the increase of wages. The logic behind why they already provide higher wages is to attract and retain great talent (By Cap Action War Room / Think Progress, 2014, p. 1). These businesses that already provide higher wages are an example of what other business will be doing. In the sense that other business will be able to learn from them and be able to adapt to higher wages while staying in business.

Wal – Mart basically is in the middle of minimum wage because they believe this will lead to having more productive employees but they are not willing to increase the cost of goods.

Essentially for Wal – Mart having more productive employees leads to boosting productivity as an overall corporation. As their employees will feel they are paid more, which will lead them to being happy and being more productive. Study’s have shown happy employees are more likely

33 to increase their production. However, Wal – Mart also “wants to boost its productivity and give its workers more freedom to innovate” (What, 2016, p. 1).

One point of view of this dramatic increase in labor will influence employees to have more productivity. Usually, when employees earn a higher wage studies have shown employees increase their productivity as well as being happy. Most important the wage increase will dent

Wal – Mart profits. Although Wal – Mart wage only cost retailer 9.5% of their revenue, there will be a noticeable dent in profits (What, 2016, p. 1). They will have a dent in their profit because labor will be increased without offsetting the cost in an increase of their product.

Wal – Mart is known for offering the best and lowest prices compared to other stores such as Target. The reason why Wal – Mart is able to offer the lowest prices is because their inventory stock is produced in China. In addition, their stock will keep the annual growth rate over 20% consistent over two years (“Most (70%) of Wal – Mart’s Products Are Produced in

China”). Also, one of Wal – Mart official mention they will extend their procurement base from

South China’s Pearl River Delta to the North and East in China in a few years from now. Wal –

Mart is preparing for minimum wage increase. More overly, with minimum wage increasing

Wal–Mart has to look for an alternative to be able to maintain the lowest prices.

The article 10 Reasons to Raise the Minimum Wage states, “A higher minimum wage would mean a DVD at Wal-Mart would cost just one cent more”. Specifically Wal–Mart will not dramatically increase the cost of their products as their products are produced in China. If the given case Wal – Wart would increase of their products will not be noticeable as Wal–Mart will continue to offer the best and the lowest prices compared to their competition.

Wal–Mart’s current employees are receiving government assistance. Increasing minimum wage will not reduce the number of Wal–Mart employees or in the generally employee that are

34 working but still need government assistance. Increasing minimum wage doesn’t necessarily mean the number of employees that need/receiving government assistance, in order words

“incrementally higher wages will not much reduce the welfare bill for Wal–Mart’s worker; campaigners will go on claiming that low-wage firms are subsidized (What, 2016, p. 1). Wal-

Mart will not be increasing their cost of goods because that will be going against their mission.

Therefore, they will cope with the minimum wage in a different way such as cutting working hours for employees and reducing the overall number of employees working.

A study done recently and mentioned in The Effects of Minimum Wage on Employment found “generally stronger evidence of job loss for the low-skilled worker” (Neumark, 2015, p.

2). Job loss after the increase of minimum wage can happen for a few reasons. One reason why employer terminates employees is because they can no longer be able to afford the cost of payroll. In addition, it is much easier for the employer to terminate employee rather than increasing the price of the cost of goods and services provided. Employers will still be able to make a profit if they replace their employees with technology. Replacing employees with technology will be much easier due to employees not having workforce skills or just having the minimum workforce skills.

Congressional Budget Office Report found that twelve percent of low – wage worker would be teenagers, which will benefit from minimum wage increase (Furman and Stevenson,

2014, p. 1). In addition, Congressional Budget Office agrees that employment effect could potentially be zero but the central estimates currently don’t reflect the consensus of the economic profession.

Osmond Vitez proclaims minimum wage increases also lead to unskilled and lower education level employees. This affects business owners to take into consideration their overall

35 expense for payroll and the amount of profit being made. Businesses end up paying more money for the same amount of employee services. Worst-case scenario some businesses will end up filing bankruptcy. In addition, Vitez points out a few great points in his article in the following subtitles sections: Employer Facts and Employee Facts he refers to the first option is an increase in product prices and laying off employees. Sometimes increasing the price of products doesn’t lead to the best results especially for small businesses.

Workforce skills will be in high demand as the wage increase. “Young people will see entry – level opportunities disappear” (Hoar, 2016, p. 2). The higher minimum wage is the higher the professional development will be required for individuals to get hired. Retail and restaurants will mostly impact these workforce skills demands. On the other hands, The United

States Bureaus of Labor statistic states otherwise from Hoar research.

The United States Bureau of Labor statistic, the Economic Policy Institute mention the wages and worker productivity grew together spontaneously through the three decades following

World War II but in late 1970 otherwise happen for low-wage workers:

“But this potential has been unrealized for most American workers. Between 1979 and

2012, productivity rose 63.8%, but compensation per hour for production and

nonsupervisory workers (who constitute 80% of the private-sector workforce rose only

7.5% (Smith, 2015, p. 3).

In other words, the minimum wage has not kept pace with workers productivity because if it did minimum wage would be higher by now (higher than what it is currently). Also, Laura

Smith emphasizes how the economic profitability has mostly accrued to employees in the higher pay scale such as CEOs and shareholders unlike the lowest wage worker are primarily left out of the equation.

Income equality and inequality Once minimum wage increases there will be plenty of families, which will see a positive impact in their annual income causing it to be slightly above poverty verges (McKenzie, 2014, p.

1). As known currently all the families that earn minimum wage have their annual income below poverty or even slightly above poverty verges, it increases the gap between the wealthy and poverty. McKenzie states increasing minimum wage will reduce the overall percentage of families living below poverty. In addition, the Congressional Budget Office indicates “raising minimum wage would lift 900,00 people out of poverty” (Furman and Stevenson, 2014, p. 1).

Although the Congressional Budget Office indicates increasing minimum wage will help people get out of poverty, opponents state raising the minimum wage will not reduce poverty.

Opponents believe increasing minimum wage will not reduce poverty because the gap between the rich and poor will continue to widen. Currently, there are no studies that prove this state is accurate.

The Center for American Progress found in their study raising the minimum wage would help 3.5 million Americans get off food stamps (By Cap Action War Room / Think Progress).

The 3.5 million Americans, which no longer receive food stamps, are including current Wal-

Mart employees and other company’s employees. This study completed by Center for American

Progress does not fully agree with other economist mention above. The economist mention above believes increasing minimum wage will not reduce Wal-Mart employees from needing government assistance. However, this same study found beside helping people get off government assistance, raising minimum wage would eventually “save the government $46 billion over 10 years in spending on the Supplemental Nutrition Assistance Program (SNAP)” due to people earning enough on their own to no longer qualify (By Cap Action War Room /

Think Progress, 2014, p. 1).

“The real tragedy of minimum-wage laws is that they are supported by well-meaning groups who want to reduce poverty. But the people who are hurt the most by minimum are the most poverty-stricken” (Hoar, 2016, p. 2). These groups are the ones that want poor people to refuse pay increase as senseless this might sound. Their logic is the harder people struggle to be out of poverty the better for them, as they are able to maintain to stay within the one percent.

One possible explanation of how minimum wage will hurt the most poverty-stricken is because higher minimum wage will reduce hours; reduce fringe benefits as will as health insurance. The negative employment effects don’t represent a cost of minimum wages, which necessarily imply that minimum wages constitut bad social policy.

Significantly, “employment losses associated with a higher minimum wage may be more than offset by positive effects on low-income families, especially if minimum wages are a significant factor in helping move families out of poverty (Neumark & Wascher, 2002, p. 1). On the positive side, not many people earn minimum wage as these individuals make up a smaller share of the workforce (DeSilver, 2014, p. 1). A form of reducing economic inequality is by increasing minimum wage (“Growing Gap Between Rich and Poor – Boundless Open

Textbook”, 2016, p. 1). Increasing minimum wage will have many people not depend on government assistant due to being able to earn a higher income.

Laura Smith the author of Reforming the Minimum Wage Toward a Psychological

Perspective gives a psychological point of view of the minimum wage today. “When we speak of

America’s lowest wage earners, we are frequently speaking of the poor at the same time”, although they earn minimum wage with a 40-hour work week their annual income falls below poverty line (Smith, 2015, p. 2). As the living wage represents the minimum rate, which allows workers to afford basic resources such as food, shelter, and transportation the cost of those

38 necessities varies from place to place. However, the current minimum wage is inadequate since according to national government guidelines, raising the federal minimum wage can be seen as a necessary step in this direction. Parenthetically minimum wage has not always been poverty wage because in 1968 minimum wage was enough for a worker with three children (Smith,

2015, p. 2). As time changes and the cost of living has been slowly increasing over the years.

Not everybody agrees increasing minimum wage will specifically hurt the most people considered poverty stricken. “The non-partisan Congressional Budget Office states that raising the minimum wage would lift 900,000 people out of poverty” (By Cap Action War Room /

Think Progress, 2014, p. 1). In other words, full – time workers earning minimum wage will receive a raise of over $4,000, which is enough to take a family of three out of poverty. Most important raising minimum wage will lead to 21 million children having at least one parent whose pay will go up (By Cap Action War Room / Think Progress, 2014, p. 1). In general, everyone that currently earns minimum wage will receive a raise, which will help him or her not be considered poverty and earn more money.

Chapter 4 – Summary Conclusion Overall, increasing minimum wage is a controversial topic because even economist have

their own different theory how the increase can be a positive impact and a negative impact. Most

important increasing minimum wage is not limited to only benefiting those earning minimum

wage but everyone else.

My surprising moment during this evaluation was noticing the poverty rate being so high

for California as most poor families are not unemployed. By all means, these individual that are

considered to living at “poverty” level are working families, which is sad. Although they are

working trying to meet their basic needs they are still struggling to make a living. As Bohn and

Danielson state 55.1% that are in poverty at least one family member works full – time, so more

than half of the families have one member working full – time.

Implementation Recommendations Based on my research it is recommended that the minimum wage to continue to be

increased as necessary. Since minimum wage was established, the past 22 years minimum wage

has been slowly but surely increased as it was necessary. It is strongly recommended that the minimum wage needs to be increased as necessary as there were no studies or statist supporting the negative impact minimum wage has particular in the three outcomes: the cost of goods and services impact; private and public sector; and income equality and inequality that were

examined. Most important increasing minimum wage benefits people and the economy. Also, minimum wage has a huge impact on poverty, as increasing minimum wage is one of the forms of helping families and individuals get out of poverty. Lastly, minimum wage and poverty have always had a correlation between both.

I did come across a lot of misconception between minimum wage and poverty but there were not actual facts to support all the opponent arguments. Therefore, reinforcing my statement minimum wage should continue to be raised as necessary.

Research Recommendations As I conducted my research I came to realize minimum wage is a very complicated issue.

My research was not able to cover all the aspect of minimum wage and I personally believe

additional research is required. The additional research I would recommendation is conducting a

study focusing in general in minimum wage earners and not focusing just in teenage that are

earning minimum wage. Conducting additional research for a general sample earning minimum

wage would provide more accurate results and unbiased results.

Secondly, I strongly believe after conducting my research it necessary to further discuss

the correlation between minimum wage and poverty. Both minimum wage and poverty play a

strong role in the economy and essentially affecting people. As of now, there is not enough

unbiased study clarify such a huge impact these to variables have.

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Appendix A

IRB Letter

CSU Bakersfield Academic Affairs Mail Stop: 24 DOH Room 108 9001 Stockdale H ighway Office of Gran ts, Research, and Sponsored Programs (GRaSP) Bakersfield, California 933 11- 1022 (661) 654-2231 (661) 654-3342 FA X www.csub.edu

Institutional Review Board for Human Subjects Research

Date: 04 January 201 7 Tony Alteparmakian, Ed.D. Department ofTeacher Education To: Yaquelin N. Barrera, PPA Student Nonscientific/Humanistic Concerns cc: Thomas Martinez, Public Policy & Administration Chandra Commuri, Ph.D. Department of Public Administration Roseanna McCleary, IRB Chair Scientific Concerns From: Steve Suter, Research Ethics Review Coordinator Anne Duran, Ph.D. Department of Psychology SCientific Concerns Subject: Protocol17-01: Not Human Subjects Research

Steven Gamboa, Ph.D. Thank you for bringing your Protocol17-01, " Minimum Wage Increase Evaluation", to the Department of Phil/Rei Studies attention of the IRB/J-ISR. On the form "is My Project Human Subj ects Research?'' you Nonscientific/Humanistic Concerns indicated the following:

Grant Herndon I want to interview, survey, systematically observe, or collect other data fro m human Schools Legal SeiVice subjects, for example, students in the educational setting. NO Community Issues/Concerns

Roseanna McCleary, Ph.D. I want to access data about specific persons that have already been collected by Masters of Social Work others [such as test scores or demographic informatio n) Those data can be linked to SCientific Concerns specific persons [regardless of whether I will link data and persons in my research or IRB/HSR Chair reveal anyone's identities). NO

Colleen McGauley, MPA Community Issues/Concerns G iven this, your proposed project will not constitute human subjects research. Therefore, it Executive Director, CASA of Kern County does not fall within the purview of the CSUB IRB/ J-ISR. Good luck with your project.

Nate Olson, Ph.D. If you have any questions, or there are any changes that might bring these activities w ithin Department of Phil/Rei Studies the purview o f the IRBIHSR, please notify me immediately at (661) 654-2373. Nonscientific/Humanistic Concerns Thank you. Isabel Sumaya, Ph.D. Department of Psychology Research Ethics Review Coordinator and IRBIHSR Secretary

James Velasquez, MSW, ASW Kern County Mental Health Community Concerns/Issues Steve Suter, Acting University Research Ethics Review Coordinator

The California State University - Bakersfield · Channel Islands - Chico - Dominguez Hills - East Bay - Fresno - Fullerton - Humboldt - Long Beach - Los Angeles - Maritime Academy Monterey Bay - Northridge -Pomona - Sacramento- San Bernardino - San Diego - San francisco - San Jose - San Luis Obispo- San Marcos- Sonoma - Stanislaus

Minimum Wage Cartoon

Source: Retrieved from Progress Illinois, By Chris Britt 2016

Keynesian Economics Theory Cartoons

Source: Retrieved from International Liberty, By Dan Mitchell, 2011

Supply and Demand Theory Chart

Source: Retrieved from Economics for Business Decisions/Theory of Demand and Supply, 2016