Minimum Wage Gap Analysis

The gap between the rich and poor has been a problem since the late 20th century, but has become an even greater issue in the past couple of years. Currently, the top 1% of the richest people in the world own about 48 percent of the world’s capital. Economists predict that by the year of 2016, the top 1 percent will own more that the rest of the remaining 99 percent combined combined (Karimi). As an effort to reduce this enormous gap, some states have taken the initiative to impose a minimum wage higher than the federal minimum wage, varying from $9 to even up to $15. The reasoning behind these measures is that an increase in the minimum wage will increase the wealth of the poor while decreasing the profits of the firms hence decreasing their …show more content…
The worker’s skill set, education level, and experience are all taken into account. Corporations prefer employees with higher skill sets, upper education levels and more experience. Thus, workers with lower education levels and fewer skill sets are typically the first to be fired. This group is also the least likely to find another job due to the law of supply. It states that “as the price of a good or service increases, the quantity of goods or services that suppliers offer will increase, and vice versa” (Law of Supply). When it comes to the market of labor, the price refers to the wage of the workers and the quantity refers to the amount of people willing to work for the firm at that wage. So when the government imposes an increased minimum wage, the price increases and so does the quantity of people willing to work for that firm. This increase includes the workers with higher skill levels and experience. Higher skill sets means higher productivity, which makes them much more valuable to firms than those with lower skill sets. Thus employers are more likely to hire those with the better skills which makes it harder for those who have lost their jobs to find …show more content…
In his paper “How Effective is the Minimum Wage at Supporting the Poor”, he states that changes in prices as a “response to the minimum wage equal up to .4 for food prices and up to .04 for overall prices” (McCurdy 504). This means that people nationwide are paying up to 40 percent higher prices for food, while their salaries are only increase by about 44 percent. Restaurants will also increase their prices by .07 percent for every 1 percent increase in the minimum wage (McCurdy 504). An increase in the minimum wage from 7.25 dollars to 10.10 dollars can result in prices rising by up to 2.5 percent and approximately 7.5 percent if the minimum wage were increase to 15 dollars an hour. Most of the extra earnings employees receive from an increase in their salary will be used to pay the higher prices. As a result, they will not be any better off. However, those that are payed below minimum wage and those that have lost their jobs are worse off because they will have to pay the higher price but have no extra income to compensate for