The Minimum Wage Should Not Be Increased

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“An increase in the minimum wage will boost income for the poorest workers without the danger of creating more unemployment.”, stated President Obama in September 2014. Is this statement about an increase in minimum wage really true? There are two sides to the debate about minimum wage. The minimum wage is a major issue in the world of economics and politics. Political figures often prey on the public’s general ignorance of economics and promise to increase the minimum wage. Economists, on the other hand, view the long term effects and see the damage it can cause. David Card and Alan Kruegur, two economists at Princeton University conducted a study on New Jersey’s 18% minimum wage increase. They looked the impact on the New Jersey economy and compared the results to the state of Pennsylvania which did not make any change in the minimum wage during the period of the study..

David Card and Alan Kruegur measured the change in employment in New Jersey’s fast–food restaurants between February and December that year. Card and Kruegur found that the number of jobs grew in restaurants where pay had to rise, compared with those already paying more than minimum was and compared with restaurants in neighboring Pennsylvania, where the minimum did not change. The study also found no difference between high- and low- wage states. Most people would be delighted to here the above. They would receive more money and their standard of living would increase. But most people do not take into account the negative side effects of increasing the minimum wage. The survey taken by Card and Kruegur was done over the telephone. Fellow economists charge that the questions were vague and errors crept into the numbers.

Another study was done using the businesses payrolls found that New Jersey fared far worse than Pennsylvania. Positive effects of the minimum wage can be the obvious; more money for people. They would have more money to spend , the economy would boom and everyone would be happy. Not so; in fact, this would only encourage inflation and increase prices. Money become lesser in value and producers would have no choice but to raise prices in order to make profit. Another negative aspect of raising the minimum wage is unemployment rising. Supply of workers would exceed the demand for workers.

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