This is a big subject. And it’s one that sadly keeps coming up in our political climate! Let’s just RAISE THE MINIMUM WAGE! The poor Poor are suffering. We are selfish for not wanting to help them. “Big Business” is greedy and keeping the little man down.
But this is all political hype and distraction from the TRUE economic issues. The fact is: if we increase the minimum wage the cost of labor goes up. Simple. Period. If we raise the minimum wage, the people we are trying to help will suffer the most. Because it translates to LESS jobs. So an overall impact on the economy is less work for people who need it most (those seeking low-level employment).
Think of a simple example – McDonalds. Let’s say right now they employ 10 people at $7.00/hr and this allows them to charge $1.00 for a hamburger. If the minimum wage goes up – say to 15.00/hr – this will cause McDonalds to LET GO a number of its employees in order to keep charging $1.00 for its hamburger. So now only 5 or 6 people will be employed instead of 10! (OR – they cut hours for everyone. But let’s not go into that example for simplicity). Sure, those 5 people who kept their job may better, but what about the 5 people who are now out of work completely! They now have to find another job (increasing unemployment further) and/or now go on the government dole (i.e. unemployment or welfare). Net result: we wind up picking up the tab for once productive employees.
OR – another result: let’s say McDonalds only fires 2 people. But now they have to increase the cost of the hamburger to $1.50 or $2.00. So now fewer people buy their product because their cost of goods sold (for which labor is a factor) has artificially increased. So at the end of the day the entire populace is negatively impacted by higher costs for goods they want to buy. Right now we’re only talking burgers … but it’s across the board for pretty much most commodities: milk, oil, gas, eggs, etc etc. So we ALL will suffer as a result.
There is a litany of examples out there is explaining this impact. Most economics books discuss how artificial price floors or ceilings are detrimental to the overall economy though. I learned this day one in my Economics class in college.
So what if there was NO minimum wage? Would there be anarchy and rampant joblessness? Would people starve and babies die? Let’s see: