Positive And Negative Effects Of Raising Minimum Wage

Raising the minimum wage will not help the economy The issue of whether or not to raise the minimum wage has been a subject that has been in the forefront both politically and socially as of late. A minimum wage is the lowest hourly rate of pay that employers must pay their workers and is mandated by the federal government. Raising the minimum wage would actually hurt the economy because doing so would do little to lower the poverty rate, would increase unemployment for less-skilled workers and result in higher prices for goods and services. Raising the minimum wage would have little effect on lowering the poverty rate. Because most minimum wage earners do not come from poor households, raising the minimum wage would have little effect on

Economic theory also predicts that an industry wide cost shock, such as minimum wage increases, will be passed on to prices (Lemos, 187). As labor costs rise, employers can either reduce their profit or pass along the costs to the consumer. Since businesses are around to make money, it would be unwise for them to cut into their profit. According to a study conducted by Purdue University, prices at fast food restaurants would increase by an estimated 4.3% (McLure). An increase in labor costs would be met with higher consumer prices because companies would have to offset the upturn in wages. If an employer is forced to pay their workers an additional 10%, the employer will have to raise the price of their goods or services by 10% to recoup the cost. Many small businesses operate on razor thin profit margins and having to pay additional wage costs could mean the end for many of these small

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”. The problem with this argument is that employers are willing to pay their workers for their production or the perceived value of productivity. Minimum wage jobs were never meant to be careers and in fact are mostly viewed as entry-level jobs. Minimum wage jobs were never meant for professors or doctors. Instead, they are meant to help low-skilled workers gain experience and job