Is minimum wage laws worth anything?

Question

So minimum wage laws require businesses to pay employees more money in an attempt to help out the workers. Then the business might hire fewer employees or increase prices on their product, which will cost the workers more money anyway. It's suppose to improve the poverty rate, but how is increasing unemployment helping with that?

*are minimum wage laws...
my bad.

Answer 1

Minimum wage law can be looked as a political tool for politicians. Why? Well, there is not proof that this works or if it hurts the economy. Economist can do many researches, but at the end it does not holds together. Politicians can raise the min. wage to make them look good or gain support from laborers. Laborers who support this law is not completely right. Of course, long as you have a good job, then it wouldn't really matter.

In theory, yes, you are absolutely right. Many economists believe that when minimum wage is created, it gives less room to firms.

Some firms are lucky enough to have competitive labor markets. Jobs such as engineering or high skilled jobs would not make much difference since their pay is significantly higher than those who are much less skilled. At the end, even high skill labor markets do get hit hard due to min. wage. Of course it is theory, but I believe so. For firms to operate in max, they need to pick and choose right numbers of employees. This is compared with their overall profit margin from production. To make it easy I would say that min. wage went up. Now that it went up, your margin of profit will be down since you have to pay more money to produce same quantity of goods. This means, outsourcing becomes a good choice or cutting labor would be another choice. At this point, you won't be seeing low end laborers getting fired first, but some of the high paying jobs going out first since you can make up so much from that. But we really don't know how many people are getting fired from this because we can't just blame it on min. wage. There are many ways you can interpret the situation.
Now, for smaller and labor intensive firms, it is deadly. Easiest example is restaurant industry. There are many small private owned restaurants out there. After the recent election, many of these restaurant owners got nervous since Democrats talked about raising min. wage. If min. wage goes up, I would say many of these small, labor intensive firms will close their business. This will hurt them.

In more detail, min. wage itself is believed to hold back entire economy since this becomes one of the cost that will not be coming from competitive market. When min. wage rises, this will cause firms to take many actions to level up to become profitable or max. their profits. They will cut labor, but for some, they have to raise their prices since there are only so many they can cut. They will be pressured greatly from this since they are running against the supply and demand for their products. So, Monopolist or Duopolist may not feel that much pressure, but more competitive market will be pressured and may hurt the economy overall.

Answer 2

Most of my career was as a salary employee. I routinely worked more than 40 without getting anything extra. It's pretty simple really: When the cost of labor is prohibitive the jobs either just disappear or go overseas. The minimum wage hurts the young and low skilled most. If someone can only produce worth $5/hour then no one in his right mind would hire them at $7.25. That person never gets the first job to develop the skills to be worth $10, $20, whatever/hour and instead ends up on the dole. Ever wonder why the AFL-CIO is the biggest supporter of the minimum wage? The vast majority of their membership makes more than minimum wage. The simple truth is Rather than hire 4 employees that are worth $5/hour (and pay them a total of $29) the employer would much rather hire one union member that produces worth $20/hour. So the minimum wage supports Union scale by forcing low skilled workers from the market. Then those union workers got to Wal*Mart and buy stuff made in China because they don't want to dig into their own pockets to support the higher prices the minimum wage causes.

Answer 3

Economics is not my strength, but my perspective is that raising minimum wage would increase the buying power of the public and eventually make the business more profitable. The increase in buying power could depend on geographic location and industry. For example, consider a state where there is a larger amount of blue collar workers, or an industry that serves blue collar workers. Given these workers receive near minimum wage, they will be able to spend more money. However, I would think this logic might only apply in the short-term. Once again, I am not an expert in economics by any means. These are just my thoughts!

Answer 4

I'm not going to deal with the higher price issue (way too complicated). I am going to make another assumption that with the higher wages no one else joins the labor force. Like stay at home moms don't put their kids in daycare to get the now higher wages.
Given these assumptions if the demand for low skilled workers is inelastic (i.e. the employers are not sensitive to small increases in wages) then the overall benefit to the poor is greater. A few people lose their jobs but everyone else is making more money.
That is how it can happen.
My personal opinion is that in most cases the minimum wage is always so below the market wage that it is meaningless. Really do you know anyone who works for minimum wage. So what good does it do to change something meaningless

Answer 5

i can only see the benefit of minimum wage being a short term solution to poverty. ultimately, the door swings back the other way, as you alluded to....a company loses profits and shift policy towards fewer employees, lower benifits, or higher costs or all of the above. job skills are far more important in getting paid above the minimum. a lot of the manufacturing sector relies on skilled labor, and many areas lack this skilled labor. companies offer to pay for training, start people out at higher wages, and offer more benifits to have a shot at years of this skilled labor.
in my opinion, anyone trying to use the argument that minimum wage is not sufficient to raise a family seems to miss the more important issue of why would someone try to raise a family on annual $12,000 pay check.

Answer 6

yup

$6 an hour is way better than $3 an hour

any way you argue it

Answer 7

A