What would happen if the U.S. federal minimum wage was eliminated?

Question

The min wage is $5.15 an hour. Almost everyone makes more than that. So how would eliminating a standard everyone exceeds be bad?

Answer 1

I can see where your logic is going on this. The federal minimum wage is nothing more than a tax on business, friend. It's going to hurt small businesses the most. All the talk of raising the minimum wage is going to create 2 problems for small business owners short on liquid assets:
1) small business owners will have to cut some employees to continue to stay in business and employ everyone else. If this happens, the price of their goods shouldn't change.
2) small business owners will have to charge more to their customers. The employees are still around, but the customer foots part of this new tax.

Answer 2

I think that eliminating the minimum wage would be a good thing for the economy. People here are focusing on the negatives and not looking at the whole picture. Yes by eliminating minimum wage many companies like McDonalds who pay their workers at minimum wage level would lower the wages and yes there is going to be some people that are going to be paid less and many think that poor people are going to get hurt more from eliminating it but people here have not considered the possibility that the minimum wage was not helping the poor section of the population in the first place. I am providing 2 link to 2 short articles that explains that minimum wage was helping very little the poor section of the population below the poverty line. According to the first article less then 20 cent on the dollar was going toward families below the poverty line when wage was increased from 3. 25 to 4.25 in 1996 and only one third of the increased wage bill flows to families in the bottom 20 % of the earnings when wage was increased from 4.25 to 5.15.

http://www.frbsf.org/econrsrch/wklyltr/wklyltr99/el99-06.html
http://www.frbsf.org/econrsrch/wklyltr/el96-29.html

Now lets look at the positive effects the benefits that will occur if you eliminate the minimum wage. Yes there will be companies like McDonalds that will lower the wages and some will be paid less but there will be more jobs available. By eliminating the minimum wage you eliminate a cost for the company and by eliminating this cost of paying workers more then what they should be paid more then what demand and supply levels show you open the possibility for this company to invest more and expand their business creating more jobs. So by eliminating minimum wage you slow down unemployment because there are more jobs available and more investment possibility which means economic expansion. Also you slow down immigration. The incentive for people to come to the country would be lower because the profit is not so big anymore with minimum wage eliminated. The prices would not go up so much and might even go down because the cost for companies is lower and the competition is bigger because also new business who could not operate before because of the cost of operating was to big with the minimum wage in effect now they can operate with the cost going away. Lastly you slow down the movement of US companies overseas something called outsourcing. US companies now can operate inside the country because the cost for them went down. Yes people that were making 5.15 would be paid less but they would be paid the right amount the economic efficient amount but for all these reasons the benefit of eliminating it would be greater for them as well. In conclusion eliminating the minimum wage would be a great thing for the economy and everybody

Yes you right there NC that is one effect i forgot to mention the shift from Capital to Labor in the long run because in the short run it is costly to dispose all the costly machineries. But this shift does not mean it is bad for technological advancement of better machineries. Advancement in technology will continue to improve machineries and substitute labor when neccessary. I dont know if your answer was heading in that direction. In the long run Labor will became expensive eventually and will be substituted for Capital and the cycle will continue.

Answer 3

For one, more US companies would stop producing their products in other countries, like taiwan, and mexico. The reasons these American countries make their products in other countries is because there is no minimum wage in most other countries.

Companies here, fast food restaurants, wal-marts, targets.... almost every corporation would immediately drop the wages of their employees to under a dollar. If they aren't forced to pay their employees $5.15 per hour (or whatever minimum wage is now), then do you REALLY think that employers would pay their workers that much out of the goodness of their hearts? NOT A F**KING SNOWBALL'S CHANCE IN H*LL!!! If they don't have to pay their workers as much, then that means that they can save more of their gross profit for themselves, and, in human nature, usually IT'S ALL ABOUT ME, so the business owners would lower their employees' wages below a dollar so that they (the business owners) can make more money!!

Also, I believe that the rush of immigrants would be slowed down; IT WOULD NOT SPEED UP. Think about it. PART of the reason why SOME immigrants immigrate to the US is because of minimum wage; they can get more money for their work here. So if minimum wage were eliminated, their would be less of a pull factor influencing foreigners to immigrate here.

Hope this helps,
Mikey

Answer 4

You might want to do a google search of David Card. He has done a lot of interesting and compelling research on the subject of minimum wages.

In a nutshell, employment wouldn't change. But some teenagers and poor households would be poorer.

Raising the minimum wage would be a simple way to reduce income inequality without hurting (and perhaps increasing) economic growth. About 15 years ago most economists would have been aghast at such a statement. Today, most would nod their heads in comfortable agreement. Funny how the political climate doesn't seem to communicate that sea change very well...

Answer 5

In labour abundant countries no one seems to bother about minimum wages even when actual wage rates are lower than the the minimum. In a country like U.S minimum wage rate of $5.0 is probably quite low and has no meaning for a majority of people. If the inflation rate is that high than rank of U.S economy in the world economy may prove to be much lower than supposed to be. There is no use of printing paper currency and destabilize national and international economy.

ADD.
2. Sacrifice small to rescue smaller--may not yield desired result on continuous basis. What is the actual cost of labour in the price of a commodity in inflationary conditions? Probably very low proportionately. The result is that prices continue to go up while wage rate remain static at low levels resulting in low effective demand leading to recession and rush to foreign markets for dumping. Large economies can please their natives by offering income earning avenues in other economies in the short run. Long run may prove to be very uncertain and laiden with confusion. Some thing like 'bounce and bounce up ultimately to land at the same point'.

Answer 6

Puerto Rico

Answer 7

There would be a shift away from mechanization; jobs that are currently mechanized (and unionized) would become manual (and non-union) again. People now living in extreme poverty would find it somewhat easier to make a living, while many semi-skilled workers would see their jobs disappear and would be forced to accept unskilled jobs with much lower pay.

Answer 8

The minimum wage would go down!

Answer 9

Low end jobs would have a far lower wages. and the faces in your local supermarket would probably change

Answer 10

wages for the real crappy jobs would drop ( but most states have minimum wage laws also - many higher than the feds )