More Jobs, More Pay!
With the majority of states issuing a new higher minimum wage, several people feared a decrease in employment. Firms would have to compensate for the increases in wages by cutting production costs. With production costs down these firms would have to cut back on hiring. Several jobs would be lost. It would also be very tough to find a job for all fields.
According to the New York Times’ article titled, “U.S. Job Numbers are Stronger Than Expected,” by Jeremy Peters employment outside the farming sector grew by 180,000 in March and that job growth from January and February has risen higher than planed. Economists predicted 130,000 jobs would open up in March. Along with the rise in jobs unemployment also fell from 4.5% to 4.4% in March reaching a five month low.. Jobs are now paying more too. The average hourly wage rose 4% in March and is continuing to rise.
What do you think is the reason for the increase in jobs and wages? Does the minimum wage really effect employment? Is the Fed responsible for the increase? Or are there other factors to be considered?
7 comments:
With a higher minimum wage, I think, companies always want to fire some workers. In that way, they can reduce the variable cost so that they can get more profit. I wondered whether we can think this question in this way: we should see the market price first. If the average variable cost lower than the market price, we should not have to fire workers and we can continue producing products. However, if the average variable cost higher than the market price, we should fire some workers to reduce our total cost or we have to cease produce products.
The increase in jobs is typical with a slightly more increase in wages due to the new state enforcements. The increase in jobs could be contributed to the increase of the labor force participation rate. Minimum wage has not affected employment so far in the short run, but may become a factor later.
From various articles I can recall reading in the past few months, there was already an adjustment in the expectations for job growth downward as a result of the minimum wage increases, so higher than expected growth in that area would really be more in line with the pre-adjustment expectations. That being said, I think that there are more jobs being filled now that the minimum wage is increased as workers are now seeing wages that exceed their acceptance wage levels as a result. Given the statistics, the new minimum wage levels in many states were placed at a decent enough level to pull many job seekers off of the couches and into positions in the market. This type of economic scenario is the optimal that one would expect with an increase in wages, so I don't think that this is sustainable.
With an increase in wages there should typically be less jobs. The jobs might still be increasing because it is too early for businesses to adjust. I'm sure businesses will due whatever it takes to eliminate other variable costs first. If they find that they can't eliminate other variable costs then they will have no choice but to lay off workers. It is just too early to tell if new jobs decrease.
When wages are increased it is normal to see that amount of jobs available decrease. This so far is not the case and it could be a result of many reasons. When wages increase so does the price of products. The only difference is that our wages will increase overnight whereas it may take a couple of months for the products that people consume to begin increasing. I believe that we are in the transition period where our wages have increased but the price ratio of the products that are sold has not increased to the ratio that it was before the wage increase. Since it is not at this ratio yet, Americans are still benefiting from this wage increase so they are currently spending more money. If Americans spend more money than many places are still able to hire more people because they are making more money as a result of this. As the ratio of the products that American consume slowly rises to the ratio that it was before, more and more jobs will then begin to suffer and it is then that job cuts will start taking place.
In the short run, it does not appear that employment will be affected. As minimum wage increases, it offers an incentive for more and more people to join the labor force. However, when employers have to pay more for their labor input, they very well may cut jobs and reduce output with an increased cost in total product and production.
Population growth is a good reason why jobs weren't lacking after the raise in wages. As long as the world grows more jobs will appear because more company's will be created to support the population. The wages were playing catch up with the number of people in the U.S.
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