Link between Higher Minimum Wage and Higher Unemployment

However, this move is not always a wise one because when an enterprise has fewer workers it would reduce its productivity which would mean more

It can also be argued that raising the minimum wage would inadvertently have a negative effect on the economy and actually increase poverty. If the minimum wage were to increase from $7.25 to $10.10, the result would be the loss of 500,000 jobs, as predicted by the Congressional Budget Office (Should the Federal). 54% of employers stated that they would lower hiring levels and 38% stated that they

In ¨Raising Minimum Wage Increases Unemployment,” Christopher Jaarda, a writer for Gale and also an attorney with the John Hancock committee, claims that there is a correlation between minimum wage hikes and unemployment. Christopher states many different times where the government has raised the minimum wage and then, as a result, the unemployment has gone up substantially. In the chart, there is a clear correlation all these years that they have raised it. Out of 5 different times that they changed the minimum wage every time the unemployment way up with it except for 1996. It did go up, but not that much like the others. The most recent increase was in 2007. The unemployment before the raise was 4.6% and then after its unemployment peaked

Raising the minimum wage sounds like a beneficial idea, but there are also a few surprising reasons why it might not be such a good plan after all. A common assumption among Americans is that raising the minimum wage equals an increased income, but, according to Joseph J. Sabia and Richard V. Burhkauser that may not be the case. They discovered that, “examining only employment effects, however, may mask full labor demand effects. Firms may respond to minimum wage hikes by (i) reducing both employment and average hours worked by employed workers or (ii) increasing hours of retained workers to compensate for reduced employment” (Couch and Wittenburg 2001; Neumark and Wascher 2007) (595). What, exactly, would be the point in

One of the biggest arguments against raising the minimum wage is that it ends up raising employer costs (ex. having to pay more for employees) and leaves less and less opportunities for teenaged workers and disadvantaged workers to find jobs. However, David Card and Alan Krueger, both of whom are heads of the

One of the main arguments made by those in favor of raising the minimum wage is that there are studies showing little to no effect on the employment rate as a result of the increase. In the study “Why Does the Minimum Wage Have No Discernible Effect on Employment?”, author John Schmitt makes the statement “…Two recent meta-studies analyzing the research conducted since the early 1990s concludes that the minimum wage has little or no discernible effect on the employment prospects of low-wage workers” (John). Those in favor of the raise explain that although it may not decrease unemployment necessarily, it would improve the living conditions of those who are already employed and working for a wage that is too

Figure 7.6 shows how the minimum wage creates a price floor. The difference between the wage rate and the amount of workers needed is unemployment. Figure 7.7 shows the potential loss of labor demanded by businesses. This could become a positive statement to say that raising the minimum wage will increase unemployment. "Recent research reveals that, despite skeptics’ claims, raising the minimum wage does not cause job loss." (Cooper and Hall). An

When the minimum wage goes up, money will get shuffled back into the economy once the lowest earners can invest. “It also would help the economy by supporting consumer spending that in turn supports job growth” (Source 1). Once the lower class starts to earn more they become capable of consuming more, so in the long run it would benefit employer. Although some may argue that a higher minimum wage would hurt employers, it would not due to a gradual change. Also, more consumption of products creates more jobs which helps the economy and the general

In addition, increase in minimum wage increases the number of worker and decreases the employee turnover rate. Chad Halverson writes employee who work on higher minimum wage feel more comfortable and satisfied in their jobs. Due to this reason, there will be less chance to quit the job. According to many economists, Yellen Janet, Manning Alan,

Raising minimum wage would give greater chances of negative effects occurring on workers incomes. Many low income workers will have a higher income because

Many argue that raising the minimum wage makes hiring workers more expensive, eliminates jobs at the bottom, slows growth and ultimately raises unemployment. Economic studies show that raising the minimum wage to keep pace with inflation creates little additional harm, but what the president is

When the cost of labor is increased artificially by legislation instead of through market forces, companies will attempt to reduce their cost. When you pay someone more to work, the assumption is that they will have more disposable income and increased consumption will contribute to the economy as a whole. By increasing the cost of labor without an increase in productivity, market forces will cause a business to look for alternatives either through reduction in work force or by relocating jobs (offshoring). While those who are still employed will see an increase in pay, those lost their job will have no income and the government will lose the taxes associated with those jobs.

Minimum wage laws do not encourage higher production out of the labor force. Instead it entitles the labor force to a guaranteed rate. Employers who can consolidate workloads and burden employees with more work will do so. There are a lot of factors that go into wages, and productivity is certainly one of them. An employer expects his/her employees to meet a certain standard and current minimum wage workers will most likely be forced to do more work, and to keep labor costs low, employees will have to take on more job duties to make up the difference in hours available. Also, to cover the increased labor costs, employers will most likely raise prices. So an employee who is making more money on their paycheck will be spending more money on the things they normally purchase, therefore the raise in minimum wage does nothing for that employee if they are making more and spending more. David Foster, owner of The Grass Butler, said “While raising prices may help cover some costs, middle class workers will lose buying power due to frozen wages and higher prices. Minimum wage laws close the gap between the middle class and lower class at the expense of the middle class.” Most employers also offer benefits to their employees, which might include paid vacation (or PTO). To cut costs down an employer might take away PTO, so any vacation time taken is now unpaid time off. Minimum wage jobs are there to help you step up to a better job, you aren’t meant to work at a minimum wage job for years and

Contrary to these beliefs, I believe that raising the minimum wage will not only benefit the company and employee immensely, but overall increase the productivity of workers. The raising of the minimum wage will help these low income families support their families, which decreases the poverty level too.

Moving along the list of advantages, increasing the minimum wage will also increase the amount of money workers have, which, in turn, will inspire them to increase their consumption and pump their extra money into the economy. If workers have more money going into their pockets from increased wages, the income effect comes into play, and provides an incentive to go out into the market and buy goods and services. In an article printed by The New York Times, it was also pointed out that raising the minimum wage would decrease labor turnover. This is because if workers are paid more, they have less incentive to leave their current job and seek a higher paying job.