preview

Price Control

Good Essays
What would happen to your business if the minimum wage were drastically increased? Could you afford it? What impact would it have on those making more than minimum wage? The questions have been debated for sometime, but recently the debate has intensified because President Obama made a proposal to raise the minimum wage to $9 from its current status of $7.25. Bustamante’s article “$9 minimum wage sounds good but it would be bad public policy” focuses on the negative affects implementing a policy to raise the price floor on minimum wage would have on the United States. There are three key principles of economics that Bustamante touches on in the article, the first is people respond to incentives, the second is people face trade-offs, and finally a country’s standard of living depends on its ability to produce goods and services (Mankiw, 2012). After summarizing the article the goal is to identify the impact this policy will have on supply and demand, discuss the changes, and draw the supply and demand graph to detail the change.
Economic Principles
Bustamante argues, that in theory, raising the minimum wage seems like a fantastic idea, because businesses will have to pay workers more. In turn, this should provide workers more of an incentive to work, which would improve unemployment and the supply in the job market (para. 2). Providing higher minimum wage puts a greater amount of money in the workers pocket and allows them to spend more, which should be a positive for business as well. The increase in price for the same amount of skill and service diminishes the profit margin the business was able to make. This imposes a problem for business because they will have a harder time affording to pay workers this amount, which brings ...

... middle of paper ...

...t have a job previously, creating a surplus of people needing a job. Meaning that the employers are willing to decrease demand, and make less people do more work.
Conclusion
As we see in the graph, when price increases the amount of workers increases, but the employers decreasing the need for employees at that cost. Again this will cause unemployment issues with number of employees needing a job significantly exceeding the number of jobs demanded by employers. Based upon these fundamental aspects of supply and demand as Bustamante suggests raising the minimum wage will have more negative consequences than positive.

References
Bustamante, J. (2013). $9 minimum wage sounds good but it would be bad public policy. Inside
Tucson Business, 22(41), 11.
Mankiw, N.G. (2012). Principles of Macroeconomics. (6th ed.). Mason, OH: South-Western,
Cengage Learning
Get Access