What are the benefits of a minimum wage? Doesn't it create unemployment?

Answer 1

raising the minimum wage raise cost of labor at all levels of production and marketing. higher prices so buying power remains same or lowers, but union contracts are tied to it so when it goes up so does the union pay scale for government jobs. they get large pay raise and no politician can be blamed for it.

Answer 2

I like rons answer because he understands that raising the minimum wage is not just about a few poorly paid workers at the bottom, but will also raise wages all wage labor with the effect being stronger at lower wages. However many economist think this would be a good thing, and will counteract the growing income inequality that the US has been experiencing for decades due to globalization, technology, and to a lesser extent immigration. The IRS reported last week that the bottom half's income share fell to a new low (less than 12%) in 2006 while the top 1% had another gain. To see more data on the growth of inequality see
http://visualizingeconomics.com/
The inflation generated by increased labor costs can not be very large, because the low wage labor is only a small fraction of gdp, so only a small fraction of goods and services the economy produces would be effected. Partial equilibrium analysis ( supply - demand ) would lead one to think that it would cause large unemployment, but if you include the feedback effect of increased demand generated by the increased wages, the predicted unemployment would be much less. Since the slope of the supply and demand curves are not known you have to look at emperical research to find the amount. Most studies have show the the increase in unemployment is small even for teenage workers, and some found it to be so small as to be unmeasurable (less than the noise generated by normal changes in the economy).

Answer 3

Benefits of min. wage? It prevents wage dumping. If you want to see problems in a country that doesn't have minimum wage laws, then look at Germany. Companies hire the cheapest labour possible. People (locals and immigrants) cannot support their families on the wages that are paid and the people end up having to request additional social benefits from the government even though they're full time employees. It goes completely against the fair wage for fair labour principle.

Not having a minimum wage does not prevent unemployment. Again, see Germany. Not having the min. wage law hasn't prevented unemployment from skyrocketing.
Because the drain on the state is so enormous in terms of additional benefits required for people, they are now reconsidering the laws because they realised that not having minimum wage laws means that the state is in effect subsidizing private companies (aka everyone's taxes are paying for corporate profits).

... and don't think that wage dumping only affects low income poeple. It affects all professions. Companies start to collude and the wage base erodes. We've seen some examples of that in the US. While collusion is illegal, it happens anyway, esp. when it comes to wages and salaries.

Answer 4

Minimum wage can assure a bare minimum wage for workers. While it is typically very low, without a legal minimum wage, employers COULD employ people at below that...

In terms of economics, a low minimum wage reduces labour costs in manufacturing etc, so products can be produced for a lower price, and hence increasing competitive ability with other economic entities.

Answer 5

Delta D should be slapped in the face for his comment. Refer to the supply and demand diagram. Demand is downward slopping. Supply upward slopping. A min wage is a price floor. A binding price floor creates a surplus. A surplus of labor creates unemployment. Welcome to the conversation, Delta D.

Min wage sucks. I think it should be lowered slowly and then eventually repealed. (slowly is important; as a rush of unemployment would kill the economy) I don't give a damn about equity. I don't believe that should be an economic goal. We are competing against China and other such countries, we shouldn't disadvantage ourselves.

The arguments for min. wage are weak. Honestly, I don't think anyone who has mastered economics would believe it's a good nor necessary policy.

Simple graphs? That's actually an oxy moron. Tell me how cost curves are simple graphs? Simple......what an idiotic statement. The graphs are simplifications, but, the are not simple!

Answer 6

It creates unemployment if you believe the academic theories of the conservative economists with their simple graphs. But I think those are way oversimplified views of the economy. I think the minimum wage is simply a transfer of wealth from the wealthy to the less fortunate. Just as in the same way, the cut in the capital gains tax rate is a reduction in the income tax obligations of the wealthy.

Answer 7

The main benefits of minimum wage are it sustains feelings of power among government officials. They come to know they rule and control business owners and make them pay more. The main disadvantage is the US it that it creates more poverty. Business owners can no longer afford to employ as many people so those laid off are forced closer to poverty. It does create unemployment. Rather, govt officials should lead by telling workers they can improve their wages through improving their skills to serve others. When they artifically raise their wages by govt decree, they send the message that skills do not matter and so workers are less motivates to improve their skills to raise their income. Why should they? The govt puts a gun to the head of their business owner and makes them pay more.

Answer 8

Minimum wage was originally supposed to guarantee that no matter what job you did, you could make enough to survive. Without a minimum wage, a company with unskilled jobs could easily force workers to compete with each other for lower and lower wages. For example, if unemployment is high, and I have 5 jobs for dishwashers, and I really don't care who does the job (as long as their not felons). And there are 100 people who all want the job, because they can't find any other job. The first person offers to do the job for $5an hour, because that's what that person needs to survive. The next person offers to do the job for $4 per hour, because that person is willing to leave at a worse level. The next person offers to do the job for $2.50 per hour, because that person is willing to work to 40 hr/week jobs, and thus make enough to survive. The next person offers to do the job for $1 per hour, because he's willing to live on the street, but needs just enough money for food. The next person will do the job for 50 cents per hour, because he also lives on the street, is willing to eat from dumpsters or soup kitchens, and only needs money for alcohol. In the end, no one can ever make enough money in order to live.

The problem currently, though, is that minimum wage isn't enough for even one person to live off of, as it was intended.

Answer 9

There is no economic proof that minimum wages cause unemployment.

Answer 10

the minimum wage in my opinion doesnt affect someone from starting a business. doesnt affect me, of course i will be looking for ways to cut cost.