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The Dark Side of Minimum Wage

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Although it was first born in Australia and New Zealand, minimum wage now seems inherently American. It is regarded as a way to help the poor maintain a standard of living, and to ensure fair pay for everyone. Most Americans revere it, with a good reason; Time magazine estimated the increase from $5.15 to $7.25 since 2007 has contributed $4,400 to the yearly income of a full time minimum wage worker. All of this has become the surface of minimum wage, the face that most Americans see. However, behind this mask lies the full story of minimum wage.

When viewed from the perspective as an employer, minimum wage has different connotations. Mandatory increases in wage mean an increase in costs to the employer. With the recent economic troubles, employers are already doing everything they can to cut costs. When there are increases in costs, they will have to find a way to get those costs back down again, and they often do this by hiring less people. This results in big, bad Unemployment that people are even more afraid of than low wages. University of California professor David Neumark estimates that the increase in minimum wage that occurred July 2009 would cost 300,000 jobs in an economy that has been trying to decrease the unemployment rate.

Of course, the effect of an increase in minimum wage is felt differently to everyone. It is indifferent to those with higher paying jobs. It helps those who had a minimum wage job before the increase. And for the unemployed poor, for the unskilled worker, it makes it more difficult to get a job.

And who were we trying to help in the first place? Our society encourages the poor to get jobs. But in our attempt to help people we have hindered their efforts to support themselves. Increases in minimum wage might seem like a nice idea, but in reality it has consequences that our current economy can’t bear.



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Threefiddy said...
Jul. 14, 2010 at 12:54 am:
It's basic economic principles that when an employer has to spend more money on an employ and their benefits, they don't hire more people. In an open and free market, people bargain for their services. Producers try and get the highest price for their products, and we try and get the lowest price. When we first enter the job market, we generally will not be able to sell our limited skills for much; because of minimum wage, employers have to basically give charity for our labor, it is being subsi... (more »)
 
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