Sunday, April 13, 2008

Minimum Wage and Today's Financial Markets

In class the other day we talked a lot about the labor market at the macroeconomic level. A comparison was made between raising the minimum wage and the current status of the US financial markets. In both cases, jobs are being lost because of financial obligations (or lack there of). If we were to raise the minimum wage, firms would no longer be able pay as many employees and jobs would essentially be crowded out. Similarly, the credit crunch which the US economy is in the midst of experiencing has caused many firms to cut back on spending, resulting in them not hiring as many undergraduates as they have in recent years.

I found this article in the Wall Street Journal which I think is very interesting as well as applicable to not only this situation, but many professions that students in the business school will most likely pursue. The article emphasizes the poor status of the market and how 2008 undergraduates are simply not getting the offers they are expecting. The jobless rate is now at an astounding 5.1%, a figure that hasn't been reached in three years.

Although most of these firms are paying well above minimum wage, the article also highlights that firms are not increasing salaries at their typical rates.

I know this topic has been touched by discussions regarding Bear Sterns and friends that have unfortunately lost their jobs before even starting. That said, I would like to commend all of our 2008 graduates in our class that have in fact landed full-time jobs in this tough environment.


Blogger Ashley said...

After reading the article that was linked to this post, I for once was very glad that I wasn't a Business School major. If you think about it, after working so hard for four + years for some, and then to get out and not have a job, would just be awful. What would be the point of going to college if you knew there were not going to be jobs available in your field once you graduated? The article said this crunch can only get worse, especially for those graduating college in 2009. I would hate to see what this is going to be like for the incoming freshman class when the graduate in 2012. Hopefully by then though the economy will have turned around and we won’t be fighting with these issues.

I thought the article raised an interesting point about how many companies are looking for college graduates with a degree in computer science. Maybe over the next few years we will see an increase in majors that have to do with computer sciences and possible a decrease in fields like business.

It is also possible that many students might major in both, in order to make themselves marketable. We see this now with incoming freshman classes. These kids have traveled the world, spent hours studying to maintain their 3.75 GPA, and spent much of their high school careers volunteering in order to get accepted into the college of their choice. But by pushing these kids do you think we have set them up for failure? It’s great to be well-rounded, but the stress might do more harm than good. And now adding that they might not have a job when they graduate college, they have to try even harder to make sure they stand out.

What are your thoughts on this?

9:01 AM  

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