The Effects of Raising the Minimum Wage on US Economy

1507 WordsJan 27, 20186 Pages
People go to work to earn their income to support their family. Due to the fact that the prices of goods increase year and after year, the minimum wage has been increasing from less than a dollar to $7.25 now. The question that comes to everybody is that should we increase the minimum wage by too far. Does the minimum wage increase reduce the unemployment since now the current wage is high enough? Some people might think that we should increase the minimum wage in order to increase the labor supply. However, if we think deeply than this, there are more disadvantages than advantages of increasing the minimum wage. The farther the minimum wage increases, the less labor supply will be. Therefore, how will the minimum wage increase affect the US economy overall? How far should we go to increase the minimum wage? Drawbacks: We first define the definition of the minimum wage. It is the wage that must be paid legally to each employee. The minimum acts like a price floor that prevents the labor market to self-regulate without any intervention of the government. When the minimum wage is set in the market, the demanders (employers) and the suppliers (employees) will find it hard to negotiate over the market price. The higher the minimum wage is, the more condition the employers have on the employees. Now employers will have preferences since they can reduce any unqualified workers by demanding the workers who have high skills. There is a surplus in the labor market; in other words,
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