The Effects of a Change in the Minimum Wage

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The Effects of a Change in the Minimum Wage In 1938, the Fair Labor Standards Act was passed and ever since, the United States has required that all firms that do at least $500,000 worth of business per year pay their workers a minimum wage (“Handy” n.pag.). Because it affects so many workers in so many different aspects of the economy, the minimum wage plays a big part in the cost of labor and how firms deal with those costs. A change in the minimum wage, which would seemingly affect only workers, can actually be felt sometimes all the way down to the consumer, who might end up paying for it in the end—unless the firm finds another way to pay for the mandatory raise for all its workers, such as a decrease in its workforce or a change in the production process. These changes the consumer might not noticeably feel. A change in the minimum wage has several short-term and long-term effects on the economy that can be either beneficial or devastating to society at large. The arguments for and against the minimum wage have been ongoing. On one hand, it’s simply a supply and demand issue. As prices (or wages) rise, the demand for that product (or labor) decreases—in other words, employers will simply stop or slow down their hiring. If the minimum wage increases too much, then it could even force some smaller firms out of business. Then even more people will be out of work. On the other hand, better paid employees could feel more motivation to increase their productivity. And increase in a company’s productivity could be high enough that, in order to keep up supply, it might need to hire even more employees. In this case, raising the minimum wage has increased employment. So who’s right? Almost all studies of minimum wage ef... ... middle of paper ... ... "Handy Reference Guide." ESA/WHD: Wage Hour Division Home Page. U.S. Department of Labor. 21 April 2001 . Neumark, David and William Wascher. "Employment Effects of Minimum and Subminimum Wages: Panel Data on State Minimum Wage Laws." Industrial & Labor Relations Review Oct 1992: 55. EBSCOhost MasterFILE Premier. 22 April 2001 . Partridge, Mark D. and Jamie S. Partridge. "Do Minimum Wage Hikes Reduce Employment? State-Level Evidence from the Low-Wage Retail Sector." Journal of Labor Research Summer 1999: 393. EBSCOhost MasterFILE Premier. 22 April 2001 . Wimmer, Bradley S. "The Minimum Wage and Productivity Differentials." Journal of Labor Research Fall 2000: 649. EBSCOhost MasterFILE Premier. 22 April 2001 .

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