The Debate Over The Minimum Wage

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Introduction The minimum wage has been a controversial political topic in recent years. A number of politicians on the left have advocated that the federal minimum wage be increased, including presidential candidates (Carroll 2016). However, this proposal is opposed by many economic conservatives, and this has prevented the federal government from taking any action on the minimum wage. A number of cities and states have taken matters into their own hands and increased their own minimum wage, in some causes to as high a $15 per hour (Bernstein 2016). Proponents of the minimum wage claim that it will increase income for low wage workers, which will help the economy. Opponents of the minimum wage claim that an increase in the minimum wage will reduce employment and increase prices, harming the economy. This paper will analyze the issues surrounding the minimum wage. The next section will discuss the economic theories that are related to the debate over the minimum wage. The section following that will discuss findings of studies that look into the actual impact of the minimum wage. The final section will then discuss the findings of this paper and provide concluding remarks. Economic Theory and the Minimum Wage The minimum wage is an example of a price floor, which is a minimum price for a product that is allowed by law to be charged. In order to understand how price floors affect markets it is important to understand the concepts of supply and demand. Supply is the relationship between the quantity that sellers produce and the price of a product. The law of supply says that the relationship between the quantity supplied and the price is positive, which means that an increase in the price of a product will result in an increase in t... ... middle of paper ... ...the paper has found evidence to support the claims of opponents of the minimum wage and of proponents of the minimum wage. In terms of the opponents of the minimum wage, there does seem to be evidence that an increase in the minimum wage would result in a decrease in the level of employment. This is because a minimum wage set above the equilibrium wage causes a decrease in the quantity of labor demanded, and the Congressional Budget Office estimated that raising the minimum wage to $10.10 per hour would reduce employment by 500,000. On the other hand, the Congressional Budget Office also estimated that raising the minimum wage would increase total income for low wage workers, which supports the argument made by proponents of the minimum wage. Therefore, we have to choose between higher incomes for low wage workers or higher levels of employment for low wage workers.
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