Experience in the Field of Economics

For generations, economist have used various economic theories to explain the fundamentals of economics. At first glance economic theories can appear straightforward, but more analysis shows these theories are far more complex. When it comes to explaining economics, each economist can use multiple theories to explain a certain economic event. In fact, when you look at different news media and news outlets around the country, you can quickly tell how economist explain each event differently. To take a closer look we could analyze the increase of employee wages by multiple companies throughout the country.

Just weeks ago Jeff Bezos, CEO of Amazon, made the decision to raise the wages of all Amazon employees which included full time, part-time, and temporary for seasonal job opportunities to $15 an hour. Fox 5 News reported that the unexpected pay raise is a result of “Amazon facing harsh criticism from labor rights groups over pay and treatment of employees” (“Amazon Raising Minimum Wage”, 2018).

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With Bezos raising the wages of all Amazon employees above the equilibrium level, the amount of labor supplied will increase whereas the amount of labor that is demanded decreases.

The employee pay raise taking place can be applied to the supply and demand curve for when wages are set above the equilibrium level as it currently is for Amazon.

Throughout the Fox 5 News report it was mentioned that the unexpected wage increase to $15 an hour “will have a profound impact on the lives of tens of millions of people and families across the country” (“Amazon Raising Minimum Wage”, 2018). This decision by Bezos not only will benefit the employees of Amazon but it will also benefit the economy as well. Giving employees’ more money added to their paycheck will improve the lives of employees’ that have been previously relying on food stamps and other financial assistance from the government. The improvement of the employees’ financial position will ultimately lead to more spending on the employees’ behalf, benefiting the economy in the long run. Since the pay raise will lead to higher cost the aggregate supply will make a shift to the left to coincide with the pay increase.

Forbes also wrote an article referring to McDonald’s raising its employee wages to $15 an hour. Whereas the increase of employee wages in the food chain is seen as beneficial to many, some including the former CEO of McDonald’s seem to think otherwise. By McDonald’s following suit and raising the wages of their employees, McDonald’s will now start to see that they have an excessive amount of labor supplied than what is needed at McDonald’s franchises. With that being said many people, specifically in the teenage labor market will experience unemployment, which is the main reason McDonalds former CEO, Ed Rensi is not in favor of the pay raise stating “that’s why I’m distressed to see the numerous recent examples of minimum wage induced job loss” (Rensi, 2018). This job loss will not be related back to the people being discouraged and not applying themselves for jobs, but for the simple explanation of structural unemployment. Since the pay will be increased for McDonald’s employees’ there will be more people willing to apply themselves to jobs as well as more employees being driven to keep to their job. This pay increase will result in McDonald’s employees not having as many jobs to provide to people wanting to work due to job positions already being filled. Since the increase in wages will lead to McDonald’s franchises to have an insufficient amount of jobs available, the now down unemployment rate would eventually start making its way back up.

Earlier this year CNBC news reported on Wal-Mart being another participant in companies raising wages for their employees. The CNBC news report mentioned how not only does Walmart have plans to increase employee wages, but they are also in the works of “creating new benefits and distributing bonuses to eligible workers” (Thomas &Reagan, 2018). By Walmart following suit in increasing their employee wages, they are not only increasing their competitive market in relation to good quality workers, but they are using the theory of efficiency wages to make the workplace better for their many employees. By using the theory of efficiency wages as well as added bonuses, Walmart is increasing worker productivity. “High wages make workers more eager to keep their jobs and give workers an incentive to put forth their best effort.” (Mankiw, 2015). With workers being driven on this incentive, Walmart employers will not only start to notice a decrease in their worker turnover rates, but they will also start to notice a decrease in the cost needed for the training of employees. Since there is expected to be a decrease in the worker turnover rate, employers would not have to worry about hiring and training a large number of new employees because they will still have a substantial amount still working with the pay increase taking effect.

The Washington Post was also one of the printed media outlets reporting on the sudden wage increase for Amazon employees. Whereas many other media outlets such as the ones I have mentioned previously have reported on the benefits to come with the pay raise, the Washington Post proposed to readers a different outlook on Jeff Bezos decision to increase the pay raise. Instead of giving Jeff Bezos praise for increasing the wages to $15 an hour for his employees, the Washington Post mentioned how this might not have been the best decision for Jeff to make. “It’s unclear how veteran workers will fare and what will happen to retention” following a comment by a current full-time worker at Amazon stating “the big headline sounds nice until you realize we are losing significant benefits.” (Long,2018). With these statements being said the Washington Post is steering its readers to seeing the sudden pay raise as Amazon losing some of its valuable employees to employees that are just now or temporary entering the workforce. With comments from current Amazon employees, the Washington Post also wants readers to see the pay raise within Amazon will slowly but surely start to take away from the benefits employees are already offered.

Economic theories are used to explain the fundamentals of economics as well as giving an explanation to some of the most unexpected economic events. Throughout the country, each news outlet has its own way of reporting on an economic event in the mainstream media. From the different news outlets I have analyzed covering the pay wage increase of employees from different companies throughout the country, I have formed my own opinion. I do believe that the CEO’s of the companies changing the pay raise for their employees are making a great decision, not only are they helping their employees livelihood outside of work, but they are also on the road to promoting an increase in worker productivity within their company.

Although it is a good decision, I also see some possible negative outcomes coming from this pay raise. Some people may face structural unemployment due to job positions already being filled, and many employees may start to see a difference in their benefits they were receiving previously. Since jobs have increased wages employee benefits are slowly going to decrease over time. Based on research I have accumulated over different media outlets, you can see how relying on one media outlet can be very misleading on the positive and negative effects of a certain economic event.