In the United States Minimum Wage is approaching record lows. Even with recent increases inflation is one of the main reasons that workers are being paid less for labor than they were back in the Seventies. There are about 3 million workers in the United States that worked full time year round last year and still fell below the National poverty level. If everyone earns exactly the same amount of money, then the income distribution would be perfectly equal. If no one earns any money except for one person, who earns all of the money, then the income distribution would be perfectly unequal.
In a normal society Income Distribution is usually somewhere in the middle of perfectly equal or unequal. When a small number of people start receiving a large portion of the income in a society, the government tries to find ways to redistribute income. Governments try to stop the rich from getting richer, and the poor from getting poorer in order to achieve a good balance in income distribution. Minimum wage laws are a way that the federal and state governments balance income distribution. 2. Minimum Wage is considered a price floor. Minimum wage laws determine the lowest price possible that any employer must pay for labor.
In the traditional minimum wage model the quantity of supplied labor is greater then the quantity demanded. Minimum wage is above equilibrium price and quantity. Minimum wage prevents labor supplied and labor demanded from moving toward equilibrium price and quantity. Minimum wage levels become the floor and wages can not fall below the floor price. In the first two Minimum wage graphs a study that was done in New Jersey to show the effects of a minimum wage increase in employment. One of the main arguments against increasing minimum wage is that it would cause an increase in job loss.
The graphs show that there was not a huge difference in employment when New Jersey after they increased minimum wage from $4. 25 to $5. 00. The third graph shows that employment in New Jersey was more stable than Pennsylvania over a longer period of times. This could be due to inflation rates increasing, which would cause a decrease in a dollar's worth. Minimum wages need to adjust with inflation rates. Teenagers are greatly affected by the minimum wage increase of 1996. Most people believe that teenagers mostly occupy the low paying jobs in the United States, so an increase in minimum wage would mean an increase in teenage income.
Figure 2 shows that approximately 50 percent of teenagers in the workforce are affected by minimum wage. After the minimum wage increase teenage employment slightly increased. With a minimum wage increase there would be a greater incentive to join the workforce at an earlier age 3. It seems like income distribution in the United States can be fixed with an increase in minimum wage. If employment rates in New Jersey and other states did not show sharp decreases it should then be safe for a Federal Wage increase. The United States has to be concerned about high inflation and poverty levels.