The Minimum Wage Should Be Eliminated

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"The minimum wage is something that F.D.R. put in place a long time ago during the Great Depression. I don't think it worked then. It didn't solve any problems then and it hasn't solved any problems in 50 years."

-- John Raese

In the United States, the federal government maintains a national minimum wage to protect the purchasing power of ordinary workers. It seems good that the government protects your purchasing power by adjusting the minimum wage with respect to the inflation rate. Its economic side effects are so obvious that make this policy a bad one because it creates more unemployment, makes employers cut fringe benefits and is inefficient.

The first argument is that minimum wage creates more unemployment. From the point of view of basic supply and demand, workers and employers adjust the quantity of labor supplied according to wages until the quantity of labor demanded equals to the quantity of labor supplied, reaching an equilibrium wage. However, the policy ignores the market price by setting a “price floor” higher than the equilibrium wage. “A minimum wage is a...

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