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econoMAX - US needs to create good middle-class jobs
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econoMAX - US needs to create good middle-class jobs

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In early August 2013 fast-food workers across the US staged a walkout in protest about their levels of pay – they were demanding an increase from $7.25 (Federal Minimum Wage) to $15 an hour. Under......

In early August 2013 fast-food workers across the US staged a walkout in protest about their levels of pay – they were demanding an increase from $7.25 (Federal Minimum Wage) to $15 an hour. Under the current minimum wage a worker’s income is $15,000 per annum which is below poverty level pay. Although the minimum wage has increased it is still below its peak in 1968 when it was worth approximately $10.70 an hour in today’s dollars. As well as the low pay, workers in the fast food industry get few benefits and also prospects for full-time work are limited. Add to that a weak job market and ultimately bargaining position, the prospects for these workers look bleak. Although this low pay has been prevalent for many years why is it that is has become such a political issue?

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  • 1. Mark Johnston King’s College, Auckland `October 2013 US needs to create good middle-class jobs In early August this year fast-food workers across the US staged a walkout in protest about their levels of pay – they were demanding an increase from $7.25 (Federal Minimum Wage) to $15 an hour. Under the current minimum wage a worker’s income is $15,000 per annum which is below poverty level pay. Although the minimum wage has increased it is still below its peak in 1968 when it was worth approximately $10.70 an hour in today’s dollars. As well as the low pay, workers in the fast food industry get few benefits and also prospects for full-time work are limited. Add to that a weak job market and ultimately bargaining position, the prospects for these workers look bleak. Although this low pay has been prevalent for many years why is it that is has become such a political issue? Why are older workers in fast-food and retail jobs? Historically these part-time jobs have been filled by students or parents looking for work to supplement the family income. However with the downturn in the US economy and increasing unemployment, many in the labour force have had no choice but to try and pick-up any available work. This includes major income earners for families and today low-wage workers provide up to 46% of their family’s income. This is in contrast to forty years ago where there was no expectation that fast-food or retail jobs would provide the living wage as they were not the jobs that the main breadwinner in the household was employed in. In the 1980s profitable companies like Ford, General Motors and other manufacturing industries were big employers in the US economy. Workers were well paid and also had the benefit of pension plans and medical cover. However globalisation and the drive for lower costs have seen a number of US firms looking to locate overseas in countries such as Mexico and China.
  • 2. Mark Johnston King’s College, Auckland Mexico With the formation of NAFTA (North America Free Trade Agreement) this allowed for free trade between Canada, USA and Mexico which led to many US companies locating their business in the low wage economy of Mexico. China Furthermore with low wages also in China accompanied by authorities fixing their currency to the US dollar, this made it very hard for US companies to compete with such cheap imports. This has consequently led to job losses in the US manufacturing sector. Today’s biggest employers are industries that have built their business on low wages – ie fast-food chains and retail stores. Therefore, if you are to give higher wages to these workers, consumers have got to be prepared to accept higher prices. Final thought By increasing the minimum wage you do give workers extra purchasing power but this doesn’t address the problem of more middle class jobs. The challenge for the US economy is the creation of more secure full-time jobs that create higher incomes. With the US infrastructure in a state of disrepair, millions of dollars could be spent on improving bridges, roads and other infrastructure, which would not only create a number of full-time jobs, but also improve the productivity of the economy. References The New Yorker: “The Pay Is Too Damn Low” James Surowiecki – 12th August 2013