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Do Minimum Wage Hikes Increase Unemployment?

781 words - 4 pages

The current minimum wage as set by federal law is $7.25 per hour. This would mean a minimum wage worker earns $15,080 per year before taxes. Is this enough for any person to provide for themselves and their family? Those earning the minimum wage don't seem to think so and are wanting the government to increase the pay they receive from employers. The Bureau of Labor Statistics reported in 2012 that 3.6 million workers earned below or at this minimum wage ("Minimum Wage Workers"). At first it sounds like a great thing for minimum wage workers to be able to earn more money and be able to make a better living. Who doesn't want to make more money and who better to give us that raise than ...view middle of the document...

By increasing the amount of disposable income available to consumers, money is more readily available to spend on goods and services. When a lot of money is available the value of it decreases and it takes more money to buy the same amount of goods and services as before. This effect is most radically understood when studying the effect of the German government's policy on printing money in the 1920s. So much of their currency, the Deutsche Mark, was available and was cheaper to burn it for warmth than to buy the logs to do so (CITE SOURCE BY GREG MANKIW).
Unemployment is another concern when the minimum wage increases. Employers are mandated by federal law to pay their current and future employees the new minimum wage despite potentially no increases in their workers' productivity. When a business's base line is increased in this way they lose out on profits they could have been making. Since business is profiting less this could have an impact on the employer being able to provide benefits, train their employees appropriately, or employ more workers in the future.
Despite these concerns, it is a fact that millions of workers earning the minimum wage will be helped out of poverty by this improvement in...

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