In this case, when the minimum wage is raised, employers need to pay more to prevent from losing their employees to their competitors, which puts great pressure on business owners. Furthermore, raising the selling price, the second way mentioned above for maintaining profits would have a great impact on consumers. For example, Meltzer and Chen (2011) emphasize that increasing the minimum wage would increase the price of fast-food and thereby decrease its consumption. Assuming the business owners do not fire their workers, they need to increase the selling price of their products or services to increase the revenue,
A raise in wages will make cost in products go up, so then employers will not be able to afford to pay employees the higher minimum wage. This being said, another issue would be that it will cause an increase in job loss. “Raising wages would boost employee paychecks, but it could cause cost-conscious companies to reduce hiring”
I disagree with Paul Krugman, author of “Raise That Wage,” that raising the minimum wage from $7.25 an hour to $9.00 an hour would actually be a great idea for the following reasons. Evidence suggests that minimum wage increases tend to reduce job training and the efficiency of businesses. As a result, unemployment rates would rise. The minimum wage policy exemplifies the price floor and supporters of this policy see it as way to increase the incomes of low-skilled workers. However, minimum wages often hurt workers and the economy.
Some experts say that, raising minimum wages can improve the life style of those employees who are under the poverty line. They believe that by raising the minimum wages net income of the working class will increase and helps to keep the financial balance in between the management level and the operational level employee. In contrast, there are other people who think that by rising the minimum wages can have negative effect is country’s economy since company can hire low number of staff to keep expenses low, resulting massive unemployment population in the country. Some economist says that with their research they have found that actually increasing minimum wages may not have the positive impact in country’s economy, and might not have positive impact on its people either. According to them, the quantity of labor demanded increases as the price of labor falls.
Therefore, increase in minimum will hurt the budget due to more money having to be put in programs and cause the nation more debt. Minimum wage increase will have a negative effect. Businesses will have to cut jobs or increase prices, so they will stay in business without losing any money. Also the nation’s budget will hurt due to more money going into different programs of unemployment and bankruptcy. Though others feel that an increase of minimum wage will cause workers to have more money in their pockets, minimum wage should not be increased because it will increase prices, cut jobs, and hurt the national budget.
Opponents think by the sudden increase would reduce jobs slightly. The job losses to employers increasing prices to deal with the higher wage, which would lower demand and therefore their need for more workers. According to Reisman “the higher wages are, the higher costs of productions are, those who are unemployed else where and who are relatively more skilled will displace workers of lesser skill” (Reisman). His complaint is saying by raising the minimum wage they would have to raise the prices of their products. which makes the quantities of goods and services smaller.
In many cases, un-skilled workers would receive less hours to so that the employers could accommodate the increase in wage costs. This would actually have the opposite effect on low-skilled workers and would in fact increase the poverty rate. There are many other things that can be done to fight poverty. For example, raising the Earned Income Tax Credit amount would do far more for fighting poverty than haphazardly raising the minimum wage. Another argument for raising the minimum wage is that it would provide a “living wage”.
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.
Companies may have to eventually shut down if they are not able to pay their employees like they need to be paid. If the minimum wage increased and businesses/employers have to pay those higher minimum wages (higher salaries/income) to their employees. To offset them having to pay more money to their employees, they offset that extra cost to the customers or consumers generally who shop with them. It creates a ripple effect for a city, county, or region. Prices have been going up without the increase of minimum wage so imagine when if I does happen to go up.