Raising The Federal Minimum Wage

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In the US, President Barack Obama urges Congress to raise the federal minimum wage to $10.10 an hour from $7.25. Although some Republicans oppose to this action, overwhelming majority of Americans see that is a good idea (The Guardian, 2014). Regarding to the issue of minimum wage, there have been lots of debates for a long time. Some economists such as Milton Friedman deeply believe that minimum wage kills jobs, but some like Alan Krueger and David Card think, to some extend, it actually increased employment (The Economist, 2012). To detailedly understand the topic of the minimum wage, both sides debate of the economists on the issue should be concerned. The first is Milton Friedman, claiming that the minimum wage cannot help the economy on the ground that it will increase unemployment and poverty. According to the classic pricing theory, the law of demand, if the price of the labor increases, the quantity demanded for it will decline. Because of the higher wage rate, the employers will decrease the number of workers hired, or replace the low-paid and unskilled workers with the skilled, or even introduce the machinery to do the simple tasks instead of employing workers (Friedman, 1966). Also, small businesses with the tight profit margin may not survive under the higher cost of production. Raising the legal minimum wage rate reduces demand for unskilled workers by increasing the marginal cost of a worker, and induces additional search effort from unemployed
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