Increasing Minimum Wage Legislation

This article goes into detail on the effects of minimum wage on employment and businesses. In the article it gives facts on how business are willing to increase pay because the employee productivity will increase. The article also talks about how the business will yield more products making the company more money, with an end result being able to raise their minimum wage.

Workers can respond by voluntarily working harder. – Legislated increases in the minimum wage improves workers morale thereby increasing their productivity. The increase in productivity helps balance off the increase in labor cost. An increased wage rate causes an income and substitute effect. Income effect causes the worker to work fewer hours now that their income increased. Substitution effect causes the worker to work more hours.

One concern that is commonly mentioned during the debate on raising minimum wage is the loss of employment as a result of the legislation. A common fear is that small business owners will not be able to pay their employees and may need to lay off workers In order to keep the business running.

Labor is an important service that must be available and balanced in an ever growing population. For example, there cannot be a larger number of residents than there is labor or else there will be a definite increase in poverty. In the United States, there is a set law of minimum wage, which has an effect on companies and how they manage their labor force. The increase of the minimum wages affects the overall distribution of hours available, therefore, hurting the amount of labor needed. Conversely, minimum wage also has a major effect on those who recetly entered the workforce. If the minimum wage rises, there will be an increase of the unemployment rate. Correspondley, as the unemployed suffer, the first to be affected will be incoming laborers who are looking for jobs and work experience which is essential for their future. However, the upside of increasing minimum wage is that for those employed who keep their jobs they will earn more income which may increase the

Raising the minimum wage can hurt many people in different aspects of business. Increasing the minimum wage will cause businesses to lay off employees. Matt Zwolinski stated “By increasing the cost of labor, they reduce the demand for it” (3). This essentially means that those who are increasing the minimum wage are also creating unemployment. The increase in lay offs causes the unemployment rate to skyrocket (“Should” 1). Joseph Sabia and Richard Burkhauser estimated that about 1.3 million jobs would be eliminated if the federal minimum wage was increased to $9.50 per hour (“Four” 1). Raising the minimum wage would cause many small, local shops to close their doors. Even many big fast food companies would have to close their doors because they would not be able to pay their employees (“Should” 2). Seattle, being the first US city to raise the minimum wage, has received a lot of attention. A study found that there were many jobs lost due to this wage

When federal and state governments approve a minimum wage increase, it ultimately raises the cost of labor. In response, businesses will typically account for these higher labor costs by implementing reductions in hiring, the number of hours employees are allowed to work, and employee benefits, as well as increasing the prices charged to consumers for the goods and services they provide. While policymakers are hoping to grow jobs and increase the incomes of workers, these intentions are often offset by the ways in which businesses tend to respond to them.

The minimum wage is defined as the lowest compensation, by law, which an employer may pay his or her employees. In the United States, this monetary value is set by a collection of laws on the federal, state, and local levels. While state and local governments may choose to observe a higher minimum wage than the national minimum wage, the federal government ultimately controls the income of the nation’s lowest-earning employees. At the federal level, the minimum wage was last raised in 2009, from $6.55 to $7.25 per hour. Yet, since 2009, the minimum wage has stayed the same, while the cost of living continues to climb. For this reason, an initiative to raise the minimum wage has numerous supporters, whose key arguments are the reduction of poverty and the increase in efficiency. At the same time, however, opponents of raising the minimum wage claim that it would result in unemployment and would be harmful to businesses. Although their arguments are valid, proponents of raising the minimum wage fail to see the effects of an increase in labor costs on employers. With any cost, one party benefits while another party pays. Furthermore, a raise in minimum wage, and an increase in the cost of labor, will result in losses not only for the employer, but also for the employee. Therefore, for those members of society who fall below the poverty line, raising the current minimum wage will do more harm than good.

Businesses will not just reduce the number of employees they will also seek to maximize their profit by reducing benefits. While most minimum wage jobs do not offer much in the way of benefits, many at least offer some form of incentive. In some cases it may be a free of reduced cost meal, others may offer at least some form of basic health plan or 401(k). The effect of raising the minimum wage is also disproportionate, affecting small businesses more than larger companies. This leads to a greater incentive for a small business to participate in the ""black market" for labor, by paying employees in cash in order to pay them less than

Some businesses, in order to pay employees more, will cut many workers jobs in order to keep up with costs. The business would therefore be paying its minimum wage workers higher, but according to David Neumark Chancellor’s Professor of Economics at the University of California Irvine, there is also a possibility for job loss among the minimum wage workers. Since workers have varying skill levels, this will lead companies to hire more highly skilled workers and less low skilled workers (Neumark, 2015). James Sherk, a senior policy analysist in Labor Economics adds that paying more for low skilled positions decreases the availability for these types of jobs. Many people will want to start working a minimum wage job in order to get paid the high minimum wage. Therefore, since less of these positions would be available, people would be missing out on building basic working skills that they learn at low position jobs, and that allow them to move up the ladder to better paying jobs (Sherk, 2013). The Congressional Budget Office discusses how consumers may also see an increase in prices of goods and services. Higher wages increase the costs to employers, and the employers pass off some of these costs on consumers by raising their prices. Since the prices will increase, the demand for these products will go down, and the employer will consequently hire fewer workers

Higher labor costs have a clear impact on the operation of businesses, so it is important to take into account the scale of any changes to the minimum wage. In February 2014, the nonpartisan Congressional Budget Office issued a report, “The Effects of a Minimum-Wage Increase on Employment and Family Income,” that looks into two options that should be considered. Raising the minimum wage to $10.10 or to $9.00. In the report there are distinct trade-offs. If the minimum wage was raised to $10.10, there would likely be a loss of about 500,000 jobs across the labor market, but about 16.5 million low-wage workers would see substantial gains in their earnings on a weekly basis. If raised to $9.00, the labor force would see a reduction of 100,000 jobs, but an estimated 7.6 million low-wage workers would see a boost in their weekly

However, the minimum wage hikes are sold to the low-skilled workers, the studies show the hikes can equate to job loss or hours substantially reduced. Further, compounding income disparity or causing income losses and increased poverty. The net loss, the families of the low-skilled worker are not better off and in many cases, such as single mothers, worse off. (Sabia & Burkhauser, 2010 p 5) Providing a slightly more positive view but statistically insignificant, some low-skilled workers who remain employed tend to move toward the high side of the poverty level but not out (Neumark & Wascher, 2002).

Minimum wage is the lowest or minimum compensation for workers by their employers. As such, it has a noticeable impact on the economy through various channels including standard of living, business efficiency, wage and income inequality, etc. Although minimum wage has many positive effects such as increasing the standard of living as well as reducing inequality, there are also many drawbacks to having a minimum wage such as inflation and unemployment. This paper will attempt to determine the influence of having a regulated minimum wage has on the economy.

Another root cause is that businesses don’t have an economic incentive to pay a higher minimum wage when there is an abundant supply of lowly-skilled workers. If the government forces these businesses to pay a higher minimum wage, bigger businesses will become automated and smaller businesses will hire fewer employees. As a consequence, minimum wage workers can expect to see dwindling employment opportunities. Presently, rather than raising the minimum wage, we should focus on producing high school graduates with marketable

Economic theory suggests that the macroeconomic effect of minimum wage increases on gross domestic product (GDP) is ambiguous. Minimum wage increases may increase labor costs and output prices, reduce firms’ profits and job training, and cause adverse employment and hours effects, each of which may reduce GDP. However, if minimum wage increases raise the earnings of low-skilled workers who keep their jobs—and these workers have a higher marginal propensity to consume an additional dollar of income than firm owners or low-skilled workers who lose their jobs—minimum wage increases will result in higher GDP minimum wage increases may increase worker effort, either in an efficiency wage framework (i.e. where workers are paid more to encourage higher

The introduction of minimum wage, or an increase in the minimum wage burdens the employer with increased costs, so the employer will seek to levy this burden onto the labor force to compensate for these additional costs. Veldhuis supports this by contending that minimum wage causes employers to “respond by reducing the number of workers they employ and/or the number of hours their employees work”. (1) This reaction is explained by theories of producer behavior. Economic theory states that firms are profit maximizers. Therefore, to maximize profits, the firm must minimize costs. A firm minimizes costs when the slope of the Marginal Rate of Technical Substitution is equal to the rate at which capital can be traded for labor in the market (-w/r). This is expressed by the equation = . As illustrated in