The federal minimum wage of $5.15 per hour has not been raised since 1997. Because the cost of living has increased 26 percent since then, the purchasing power of minimum wages has decreased and many people argue that the minimum wage should go up to compensate workers at the bottom of the earning scale. Twenty nine states have already raised their minimum wage without waiting for the federal government to act. The Democratic Congress and President Bush agree on raising the minimum wage by stages to $7.25 by the spring of 2009.
But advocates for and against raising the federal minimum wage continue to argue. Those in favor point out that many of the people who would benefit are the principal or sole wage earners in many families. Those against say most of the workers are students and part time workers under 25, many of whom work in restaurants where they earn tips. They also argue that higher wages force business owners to raise prices or hire fewer workers.
Economists themselves are divided. Some studies support the idea that jobs are lost while others indicate that employment went up in states with a higher minimum wage. Statistical findings from Oregon, where the minimum wage was raised in 2002, indicate that the state’s overall economy has grown well since the law took effect, but some industries have suffered. Agriculture–which competes with states with a lower minimum wage and with other countries–has not been able to expand to the same degree as other industries.
Sources:
- Farrell, Chris. “Raise the Minimum Wage.” BusinessWeek, October 17, 2006.
- Economic Policy Institute. “Minimum Wage: Facts at a Glance.” Updated April 2007.
- Solomon, Deborah. “Weighing Minimum Wage Hikes.” The Wall Street Journal, online. November 3, 2006.
- Will, George F. “Raising federal minimum wage bad idea.” Seattle Post-Intelligencer. January 5, 2007.
Saving
In 2000, when the Internet bank ING Direct opened its virtual doors, American consumers began to set up savings accounts online. Since then, many regular banks have begun offering online banking. Online savings accounts pay customers much higher interest rates than those paid on accounts opened at bank offices–even by the same bank. Online savings accounts frequently pay over 5 percent interest, whereas passbook accounts may pay under 1 percent. Not surprisingly, online savings accounts have become popular with consumers.
Before opening an online account, consumers need to read the conditions banks place on different accounts. Some banks require savers to make a minimum deposit or maintain a minimum balance in order to get the high interest rates. Others limit the number of withdrawals a customer can make. Consumers must also keep in mind that all transactions must be made online, by mail or telephone and that it can take several days for them to receive any money they withdraw. Some online banks issue ATM or debit cards, but the banks that own the ATMs generally charge a fee to users who are not their customers. Other online banks offer paperless checking accounts that give customers somewhat greater access to their money by allowing them to pay bills online. Finally, before opening an online savings account, consumers should make sure the FDIC would insure their money.
Sources:
- Block, Sandra. “Online banks heat up competition with savings rates of 5% or more.” USA TODAY, February 12, 2007.
- “Bricks ‘n’ clicks.” The Economist, February 3, 2007.
- Kingson, Jennifer A. “Going online for Savings.” New York Times, May 5, 2006.
Taxation
Most tax rates follow one of two formulas. Specific taxes charge a set amount of money for a certain quantity of a product, such as a certain number of units or a certain weight. Customs duties, for example, might require an importer to pay a set amount for every 100 shirts or for every 50 pounds of cheese brought into the country. The second formula, ad valorem taxes, is the one most Americans deal with on an everyday basis. Ad valorem rates are a certain percentage of the value of the good or service purchased. Sales taxes are ad valorem. A consumer pays less tax on a bottle of cheaper shampoo than on a bottle of more expensive shampoo of the same size because the lower price of the former is a measure of lesser value. Real estate taxes are also ad valorem. A fixed tax is not imposed on all properties. After properties are assessed, each owner pays a proportion of the assessed value of his or her home.
Sources:
- Encyclopaedia Britannica Online. s.v. “ad valorem tax.” (accessed May 16, 2008).
- Encyclopaedia Britannica Online. s.v. “Taxation: indirect taxes.” (accessed May 16, 2008).
- Legal Information Institute. “Property tax.” Cornell University Law School. (accessed May 16, 2008).
- Legal Information Institute. “Real property.” Cornell University Law School. (accessed May 16, 2008).
- Legal Information Institute. “Estate planning.” Cornell University Law School. (accessed May 16, 2008).