Should the minimum wage be increased

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Reference no: EM132391990

Question: Should the minimum wage be increased? What are the benefits of such a policy? What are the unintended consequences? Please defend your answer using economic concepts and be sure to compare costs and benefits.

There are benefits to minimum wage. Single people who work 40 hours a week while making minimum way are considered above the poverty line in the United States. This means those unskilled workers can afford the necessities while gathering experience or training. The minimum wage has little to no effect on the quantity of unemployment and does not determine the market outcome.

Though minimum wage has its benefits there are also unintended consequences. Increasing minimum wage reduces the number of unskilled workers hired. This leaves more of the population unemployed. The improvement in some people's incomes comes at cost for others, like those who lose their jobs so employers can afford to pay the higher wages of others.

Like all things there are consequences and benefits for every decision. Is one person's pay increase worth the loss salary for another? In my opinion as long is minimum wage is kept close to the equilibrium in the labor market it is nonbinding. If there is not an excess in supply of labor (or surplus) there is no issue with maintaining minimum wage. Increasing minimum wage in such a manner that it causes the quantity demand of labor to rise, resulting in a supply of labor surplus, would not be worth the increased risk.

Reference no: EM132391990

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