Minimum Wage Effects On The Economy

Minimum wage was implemented in 1938 to ensure a minimal standard of living. Since 1938 minimum wage has been raised several times. Minimum wage was established under the Fair Labor Standards Act. The Fair Labor Standards Act is enforced by the U.S. Department of Labor. There are federal and state minimum wages; however, the federal minimum wage supersedes state minimum wage. Setting a minimum wage is thought to help the economy and employment. However, many economist will argue that minimum wage increase have a negative ripple effect for the United States economy and employment (Martocchio, 2017).
Minimum Wage Effects on the Economy
Minimum wage increases seems to have a negative effect on many things. As minimum wage increases, the costs of goods and services increase as a result of companies trying to offset the increase in labor cost. Approximately 85 percent of studies on minimum wage find evidence of negative employment effects. Minimum wage increases cause organizations to reevaluate total compensation offerings. Some companies may have to illuminate or reduce benefit options …show more content…
Low wage workers may experience a lower wage growth that they would have without an increase in minimum wage. Companies may base the wages on the minimum wage increase, which may limit wage increases. Employers increase low wage employees’ wages by the required amount, which reduces the annual wage growth for low wage workers. Larger minimum wage increases tend to have a more positive effect on higher wage workers (Lopresti & Mumford, 2016). As minimum wage increases other employees’ wages do not have to increase. It appears that as new minimum wage increases are implemented current wages for employees often do not, which causes concern for workers. Many new employees may start out at a pay close to workers who have time and experience with a