Cons Of Raising Minimum Wage

2556 Words 11 Pages
Starting in 1938, minimum wage was introduced in the United States of America. Minimum wage was authorized based on an ideal in which families would be put into a better place financially. Raising an individual’s income will allow them to spend their excess cash on items that may have been once considered a luxury on their lower salary. On the opposite side of this reasoning, raising the minimum wage may not help lower income families. Job positions within a company, especially those that require a lower set of skills, may be eliminated and replaced by a lower cost alternative option. If a company is forced to pay a certain wage for an unskilled worker, the employer has to increase their requirements for such position, making workers with …show more content…
Companies in the United States are not allowed to pay their employees below this pre determined hourly rate. The idea is that giving employees this higher base wage will allow them to be able to afford higher quality goods. Raising the minimum wage would allow families to buy new simple goods such as new beds, clean drinking water, and bus rides in which they couldn’t afford before. Raising the minimum wage could also allow families to be able to afford more complex goods such as high speed Internet, air conditioning, and cable TV. Whether families could afford the simple goods listed or the complex goods listed, both will, however, increase their standard of living. Figure 1 above illustrates what happens to the quantity of labor and wages. As the government sets the minimum wage floor above the equilibrium level, companies will not be able to operate at their equilibrium. This will create a gap that may create further unemployment. The supply of workers increases because the working wage will increase, while the demand for workers will decrease because workers will cost too much to …show more content…
With poverty rate as our dependent variable and high school completion rate, unemployment rate, and minimum wage as our independent variables, we ran a linear regression analysis to test the question asking will those states with a higher minimum wage improve the standard of living within the corresponding state. As we saw in the regression, the data used was rejected thus rejecting the original hypothesis; raising the minimum wage will not raise the standard of living within a community. This paper can be improved upon with different data that focuses on communities with a high number of residents relying on the minimum wage. With data focused these areas; I would predict that the standard of living does not increase among these communities. Of course running the regression with more dependent variables along with dummy variables would make for better results and lead to a better

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