Economic Connections

Minimum Wage in America - Economic Connections

Deciding what needs to be done about minimum wage has major trade-offs. Currently, there is a lot of pressure to raise the minimum wage, as many people would like to see minimum wage become a living wage. If the national minimum wage does rise significantly, employers are forced to pay their employees higher wages. Where does this money come from? Employers either have to cut costs, fire their workers, or raise prices on their products, which wouldn’t be ideal for the firm, as the demand for those products would decrease. If the government chooses to raise the minimum wage, the unemployment rate could rise in the near future. Keeping the minimum wage at $7.25 also creates trade offs. With inflation, sustaining a $7.25 minimum wage puts the workers making the minimum wage in a worse economic position (Vietz), as they won’t be able to afford things they normally could’ve.

If the minimum wage were to increase, all businesses that have employees who make minimum wage will be affected. By raising the minimum wage, it becomes hard for the businesses to find the extra money to pay the minimum wage workers, causing the unemployment rate to rise. Increasing the minimum wage would create a scarcity in the positions where individuals make minimum wage, as businesses wouldn’t want/couldn’t afford to pay more for an unskilled job.