Essay On The Consequences Of Raising The Minimum Wage

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Damaging Consequences of Raising the Minimum Wage Who wants to earn more money for performing the same work? Most of the working population would say “sign me up”. An often-debated way to accomplish this would be for the federal government to raise minimum wage. While on the surface, this simple idea may sound like a win-win proposition; but when logic and simple economics are applied, the result is a lose-lose proposition. Raising the federal minimum wage can actually have adverse effects on the economy and the portion of the work force that it is intended to help. According to Allan Meltzer, a professor of political economy at Carnegie Mellon University, “the argument against the minimum wage lies in good economics and common sense” …show more content…
Increasing the labor expense to produce goods and perform services increases the entire cost of those products. Businesses are forced to pass those increased costs along to the consumer. Again, it’s simple economics, “the higher wages are, the higher costs of production are. The higher costs of production are, the higher prices are” (Reisman, 2015). Raising the minimum wage will just cause artificial inflation in the cost of goods. This not only hurts the minimum wage worker, but it hurts the entire consumer market. Consider this logical hypothetical situation. The lowest paid employee at a company is making minimum wage at $8 per hour, the next higher employee on the scale is the shift manager making $10 per hour, the assistant manager at $15 per hour and the general manager earning $25 per hour. If the federal government raises the lowest paid minimum wage employee to $15 per hour. How much should the shift manager make, $18 per hour? Then should the assistant manager be at $25 per hour? How about the general manager, should they be paid $35 per hour? This situation might sound like a great idea because everyone in the company is making more money, all because the federal government increased the minimum wage. The obvious question left unanswered is, how is this hypothetical company going to pay for this increase in labor cost? The company will be forced to raise the price of its products. Is the consumer market willing to pay this increased price for the products? Can the consumers even afford to pay the new increased price? In the meantime, can the company afford to stay in business while the consumer market answers these questions. In this hypothetical situation, there will certainly be companies that cannot afford the increase in minimum wage and will quickly fail, resulting in more unemployment not just

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