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The Effect Of Minimum Wage On The American Economy

1047 words - 4 pages

The Effect of Minimum Wage on the American Economy
A sensitive topic for many Americans is their income. Many people’s income relies on minimum wage. In 2012, 3.6 million people received an hourly pay at or below the national minimum wage. There is an ongoing debate in Congress as to what the national minimum wage should be. Currently at $7.25, Obama has suggested raising the national minimum wage to $9.00. Depending on a person’s economic perspective, raising minimum wage could be positive or negative. Minimum wage has the ability to change lives. Small businesses and unemployment, teenage demographics, and the cost of civilian goods would be most affected.
Many areas could be affected by a change in minimum wage, but potentially the most drastic change would be in unemployment. Advocates of a higher minimum wage insist that a raise would significantly decrease the unemployment rate in the United States and improve the quality of living, “…the increases in the minimum wage would generate an additional $25 billion in economic activity and create 1,000 jobs,” says Alison Channon, the program assistant for the National Women’s Law Center. However, there are conflicting opinions on this. Higher minimum wage would mean higher labor costs for business owners, thus making it more difficult for employers to maintain the amount of workers they have, let alone add new employees.
Raising the minimum wage does not increase the value of the worker's labor; it increases the cost. As a general rule the more something costs, the less of it people will buy. This is true of not only consumer goods but also of workers in the labor market. Large corporations provide significant employment opportunities but small businesses owners rely on the American workforce as well.There are 23 million small businesses in America, accounting for 54 percent of sales and 55 percent of jobs. ("Small Business Trends") Raising the minimum wage means that all of these corporations and businesses will have to dig deeper into their checkbooks. Business can’t afford these added expenses, which would result in a decline in an employment positions as companies would need to reduce their overhead costs. The money to pay for an increased minimum wage has to come from somewhere, and there are only a few places that it can come from. The extra money could come from the company’s investors in the form of lower profits; from customers in the form of higher prices; or from workers in the form of fewer jobs. Since the marketplace is very competitive, businesses will resist lowering investors’ profits and raising prices for customers because of the potential risk of losing them. This leaves only cutting workforce as a way to get the money businesses need to afford an increased minimum wage.There are always exceptions, but historically, businesses have financed increases in the minimum wage by laying off minimum wage workers. In 2009, when the most recent minimum wage increase occurred, the...

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