The Disadvantages Of Raising Minimum Wage

1835 Words 8 Pages
In the past year there has political turmoil about raising the minimum wage to improve the economy and help the destitute. What is minimum wage? Why was it introduced? Why should we change minimum wage? What happens when we change the minimum wage? Would the people we want to benefit from a wage in minimum wage actually receive the perceived benefit?
Minimum wage is the legal floor of a person's wages, meaning they cannot get paid less than the minimum wage. Minimum wage was first introduced in the Fair Labor Standards Act of 1938 (FLSA) which was signed by President Roosevelt on June 25th. The first minimum wage was 25 cents an hour ($4.22 in today's dollars using the May 2015 consumer price index)and affected appoxitmly one-fifth of the
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Some modern economists say that the primary purpose was to aid those who lacked sufficient bargaining power to secure for themselves a minimum subsistence wage. Therefore, theoretically one who makes minimum wage should remain above the poverty line and have sufficient income to meet their needs. However, one major disadvantage of our current set up of the way we approve minimum wage changes is that it requires congress to pass a change each and every time. The problem with that is that as time progresses the purchasing power of a dollar fluctuates and the minimum wage doesn’t have a system in place to accommodate that, so the purchasing power of minimum wage usually erodes unless laws are enacted to raise the minimum wage. For example minimum wage remained the same $5.15 from 1997 until 2006, but the purchasing power of $5.15 in 1997 in today's dollars is 7.63 (using May CPI) but the purchasing power of $5.15 in 2006 is equal to $6.07 (using May CPI) today. So someone who was earning minimum wage in 1997 was getting more bang for their buck that someone who was earning minimum wage in 2006, which is one of the reasons leading to congress raising the minimum wage in …show more content…
If we were to raise minimum wage the employee may be very happy to get a bigger paycheck, but what happens on the employer end? Businesses always struggle to keep costs low so they can make a larger profit. Employee salaries and benefits is a significant portion of these costs. If we were to raise the minimum wage the affect on the costs can be monumental. Business owners still want to make a profit and keep their costs down so they will respond raising the price of their goods and services. Also they will hire fewer employees and turn to automation as much as possible. In a big business this might work out, but the smaller businesses take a heavy hit every time the minimum wage increases.hiring fewer employees means less jobs which in way help those that are in poverty and are seeking a way

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