Wednesday, 22 October 2014

Minimum Wage Raise: Hurt or Help?

By Caroline Kimbro

An overview of the minimum wage rates across the US.
(Click to enlarge image.)

As the possibility of raising the minimum wage from $7.25 to $10.10 an hour is discussed by US government officials, we hear much about the extra money it will provide for households all over America and the ways it will strengthen the economy. However, we know that most changes come with an opportunity cost and this change in wages is no exception. If businesses are required to pay their workers $2.85 more than they currently do, most will reconsider who they’re hiring. Since they have to spend extra money on employees, many businesses will want workers they think are worth this higher wage: in effect, a raise in the minimum wage will cause a shortage of jobs, particularly for the average American teenager, unskilled worker, and minority worker.

If businesses are currently paying their employees $7.25, the money for this 39% wage increase has to come from somewhere. After the minimum wage is raised, many businesses will not have the money to keep on all of their current employees, much less hire new ones. According to basic economic principles, as soon as the price of labor goes up, the demand for laborers will fall, causing an increase in the unemployment rate. If a price ceiling is set above the equilibrium price, quantity demanded for that certain item (in this case, jobs) will go down and the amount available, quantity supplied, will rise. The supply of workers looking for jobs will go up if the minimum wage is raised and finding a job for those workers will be harder than ever.

For teenage workers looking for their first job experience, finding a business willing to hire them will be nearly impossible. Unless someone has a lot of extra money they’re just dying to spend, it doesn’t make sense financially for a company to spend $10 an hour on an untrained teenager who doesn’t have any job experience or certain skill to offer. Many employers already require that potential employees have previous job experience, but a raise in the minimum wage would make it nearly impossible for teenagers to find their first job. Consequently, it would be even harder for those students who need to work to pay for college or trade school to gain a skill that employers demand.

Although some workers and their families will be better off with a raise, many workers will potentially lose their jobs - particularly unskilled workers. If the wage a company has to pay their workers goes up, most companies will in turn demand workers of a higher skill level to meet the expectations of that wage. That’s not only bad news for teenagers, but also those who can’t afford to go to school for training - often minorities. Because of this, the main idea behind a minimum wage - making sure workers of all skill levels and economic standings receive decent pay - is essentially defeated. The very people you would be trying to help with a raise in the minimum wage, are actually those who are most likely to be laid off or unable to find work as a result of the change in wage.

In theory, a raise in the minimum wage sounds like a good idea, but the cost of this raise has to be considered - it will not only force businesses to change how they look at employees, but it will cause a shortage in jobs for American workers. For the most part, minorities, teenagers, and unskilled workers will not benefit from this raise; instead, it will make it even harder for them to find and keep a job.

Works Cited:

Richman, Raymond and Howard. “The Minimum Wage is a Racist Law.” American Thinker.5 July 2014. Web. 3 October 2014.

Perry, Mark. “Raising minimum wage would be disastrous for minorities, especially black male teens, whose jobless rate is now 44.3%.”American Enterprise Institute. 11 December 2013. Web. 3 October 2011.


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