Minimum Wage: The Economic effect on Outsourcing.

1. Minimum Wage:The Economic effect on Outsourcing. Assignment #3, Proposal Neil Reese English 2010-075

2. Problem Minimum Wage raises the total cost of business, forcing them to reduce levels of employment, which is a major factor in the current unemployment problem.

3. When did outsourcing Start? Outsourcing has been around since the 19th century, when England outsourced cotton production to India. Today, it has become more apparent since the 1980’s, when Regan’s tax system decreased the size of government programs. Outsourcing is now bigger then ever but now mostly highly skilled labor is being sent over seas.

4. Why does outsourcing occur? Companied outsource because the U.S. has higher labor costs than most countries. Minimum wage in the U.S. is currently $7.25 an hour. While in China, workers make between $1 to $2 an hour. Also education levels are rising above the U.S. in other countries, this is why high skilled labor is leaving.

5. Why is minimum wage a problem? Raising the minimum wage discourages employers from hiring more people and, in many instances, removes the entry point of the job market, which harms the very people that the increase is intended to help.

6. Effects of Minimum Wage

7. A forty year study has indicated that a legally enforced minimum wage leads to fewer jobs available, especially for the very people who need them. Labor economists, for example, point out that a 10% forced increase in wages would increase unemployment from 1% 3%.

8. If we were to RAISE minimum wage….

9. According to a Study by the University of California, Santa Cruz: In a period of 20 years, the labor intensive industries such as leather, textiles, footwear and clothing, about 1/3 of displaced workers could not find reemployment within a three-year period. Even worse, the people who did, only half of them experienced a substantial cutting in their wages by at least 15%.

10. The not so obvious Problem: With the current minimum wage rate, many companies are taking advantage of Illegal immigrants by paying them below the minimum wage rate, “under the table”, for low skilled jobs. The problem with this “under the table” business is that it leads to fewer taxes paid by workers, providing the government with an inadequate amount of tax dollars

11. Solution Do away with the minimum wage to boost employment in labor markets. This will decrease unemployment and reduce outsourcing to foreign countries.

12. Eliminating minimum Wage…

13. How would lowering minimum wage help? By abolish the minimum wage, the equilibrium price of jobs will settle at a rate that will satisfy business and employees. Studies done by Krueger and David Card, has shown that the equilibrium price will fall to $5 an hour.

14. Minimum wage was established to help lower skilled workers, by offering them a better life. Minimum wage has only made it worst for these individuals to find the necessary employment or to help them make an honest living. Only by getting rid of minimum wage, will business to find it economical to bring jobs back to America, so that every will have an opportunity for a better future.

15. Bibliography • Joel Johnson, "1 Million Workers. 90 Million iPhones. 17 Suicides. Who is to Blame?," Wired, 28 February 2011. • Tyler Durden, "Reminiscences of An American Industrial Nation – How in a Few Short Years America Lost its Manufacturing Sector" , 6 January 2011, www.zerohedge.com • Hira, Ron, and Anil Hira. Outsourcing America: What's behind Our National Crisis and How We Can Reclaim American Jobs. New York: American Management Association, 2005. Print. • Levin, Marc, and Daphne Pinkerson. "Documentary." Outsourcing and the Destruction of the US Garment Industry. HBO. Las Angeles, California, Monday Oct. 2009. Television. • Davidson, Harry R., Ph.D. "The Outsourcing of America's Jobs." The Outsourcing of America's Jobs. FinalCall.com, 23 Nov. 2003. Web. 09 Oct. 2012. <http://www.finalcall.com/artman/publish/article_1137.shtml>.