The Minimum Wage Law Essay Example | Topics and Well Written Essays - 1500 words

The Minimum Wage Law - Essay Example Opponents contend that the law costs jobs and is an unwarranted and unnecessary intrusion into the affairs of business. In fact, the minimum wage law is an unproductive and unconstitutional law that increases unemployment, does not reduce poverty, and should be repealed. Labor is one of the few commodities that is marketed in the US that has a price floor, and this artificial subsidy is counter-productive in a capitalist economy. Subsidies on items such as agricultural goods serve the purpose of stabilizing the market during periods of unusual production gluts or shortages. However, this is not the case for labor. The low skilled, low-end worker is subsidized by their co-workers and the employer as a form of economic welfare. For example, an employer needs to hire two people and he has a budget of $13.10 per hour for labor. One of the positions is more skilled, and the other is part time so he would like to hire an $8 per hour employee and a $5 per hour part time worker. However, the law says that he must hire two employees at $6.55 each to stay within his budget. The part time worker receives a $1.55 subsidy from his more skilled co-worker. The employer is faced with hiring a sub-standard employee for the $8 per hour slot, or hiring only one employ ee. According to Sowell, "Making it illegal to pay less than a given amount does not make a worker's productivity worth that amount, and if it is not, that worker is unlikely to be employed" (163-164). When goods, in this case labor, are overpriced the market demand is reduced. Rather than providing a living wage and a job, the minimum wage law drives down the cost of labor and transfers wealth from the lower economic classes to the minimum wage job holder. In addition to the reduction in demand for labor that comes as the result of mandatory pricing, there is also an oversupply of labor as many people make their services available that may not have been offered at the previous and lower prices. Teenagers, first time job seekers, part time workers, and seasonal workers may drive up the supply as their labor becomes worth more and working becomes more worthwhile. This adds to the evidence that most minimum wage jobs are filled by teenagers working summer jobs, part time help, and entry level workers, rather than coming from a background of poverty or the working poor (Even and MacPherson ii). Rather than increasing wages, the current minimum wage law creates an oversupply of labor and actually keeps wages down. The US has traditionally been a free market capitalist system, and intervening with an artificial floor on wages that is determined outside the market, reduces total employment in this environment of market economics. Labor, just as goods and services, is subject to the law of supply and demand. According to Ferguson, "The main influence is the pressure of demand on the supplies of goods and services and on the supply of labor. When demand exceeds supply there will be pressure on wages to rise" (215). The law of supply and demand further states that when prices rise, demand falls. This is especially true with prices that are set by a legal mandate. Sowell states, "a price artificially raised tends to cause more to be supplied and less to be demanded than when prices are left to be determined by supply and demand in a free market" (163). As

Sheila Bair's Bank Shot Essay Example | Topics and Well Written Essays - 1000 words

Sheila Bair's Bank Shot - Essay Example She sounded the warning bell on an impending crisis, she lead FDIC in managing troubled financial institutions and provided one of the most significant arguments in the policy reform at the aftermath. From Nocera’s perspective, Bair’s position on FDIC’s role on regulation and several policies in the financial industry has been effective and correct, but often left unheeded and unappreciated. Two of the most significant of these is: 1) her insistence on greater regulation long before policymakers and experts started to preach it; and, 2) her position that banks in trouble are not necessarily needed to be bailed out. The article, hence, underscore the importance of listening to this lady in the context of averting possible reoccurrence of similar crisis in the future. Charles Kindleberger’s theory and analyses of financial crises are descriptive and it provided the general basis for Nocera’s agreement with Bair’s position on regulation and the 2008 financial crisis. Kindleberger’s model describes an exogenous shock to the system also called as displacement. The causes of such displacement are varied and could provide diverse degree of crisis severity. The tendency to speculate as well as the inevitable complacency that comes with a stable and growing financial economy on the part of regulatory bodies are crucial elements in aggravating such displacement. These run parallel with actions taken by Bair before the 2008 crisis struck. She has started warning about the explosive growth of subprime mortgages, demonstrating traces of the principles behind the Kindleberger model on financial crises. One of the most important contributions by Bair, which could enhance the Kindleberger’s model, is in the area of crisis cont rol. One of her most forceful positions was that banks do not necessarily need to be bailed out in order to stop the onslaught of the financial crisis. This is contained in her position on the larger issue about the too-big-to-fail financial institutions. For instance, Bair vehemently opposed the federal government’s rescue of Bearn Stearns. The article’s focus on FDIC inevitably tied it with the theme of lender-of-last resort. The organization is mandated to rescue and manage failed financial institutions and regulate banks’ soundness, among other functions by virtue of its mandate to safeguard the interests of depositors and of consumers. With Bair at the helm of FDIC during the financial crisis of 2008, these functions had been highlighted and that the manner by which the organization is and should function as a lender of last resort has been clearly defined. Bair’s traditionalist position has played a significant part, particularly in reinforcing FDIC ’s power and influence today, which in the early years of her tenure as chairperson, appeared to have been largely symbolic, with weak regulatory power, clipped by the federal government, with low budget allocation. In my opinion, Bair’s position on the financial crisis is sound, with particular emphasis on the crisis management and the reforms that should take place afterwards. For example, if a huge financial institution fails, the government could further aggravate the economic landscape by infusing more funds that come from taxpayer’s money. The too-big-to-fail policy does not make sense in the long-term. First, failing financial institutions mean bad management, structure and practices. Rescuing them is more painful than having the market start over with another better managed institution rather than dumping money and implementing reforms that may never really be effective considering the sheer size of the institution. In addition, it seems to be unfair to