Why the Minimum Wage Hurts Everyone and results in Unemployment



How much is minimum wage - Supporters of a better minimum wage incorrectly think that it helps teenagers and minorities. This informative article is a somewhat brief breakdown of why and just how the minimum wage and the raising thereof actually hurts low-skilled workers when it comes to unemployment.

How much is minimum wage - On top level, raising the minimum wage raises the price of labor across the board and causes it to be more costly for firms to employ workers. At first glance (the only glance Washington ever takes), raising the minimum wage is extremely popular with the average person and to politicians. It'll put more income within the pockets of your low-skilled laborer, they are saying. Upon analysis with a couple principles of economics, however, the proposition seems the alternative of beneficial.

The laws of demand and supply dictate behavior in society whether we would like these to or otherwise, folks. Among my economics professors once said, the basic principles of economics will always be at work. This concept is simply as much armchair economics because it is technical jargon. When the minimum wage is raised, employers look for employees with additional skills that are more productive to cancel out the increased cost of that labor. Thus, they hire less low-skilled workers. You see, essentially, the very least wage law is effectively one particualr price floor. In terms of economics, it generates an immediate shortage of jobs plus a surplus of potential laborers. What is less obvious is the fact the greater the minimum wage is raised, the greater attractive a minimum-wage-rate job becomes with a previously unemployed high-skilled worker, lowering the final amount of accessible jobs even further.

Yet another effect that goes unnoticed is a potential slight increase in prices for consumers. A lot of companies will in all probability decide to not go this route, however some might. People tend to forget the money to cover the increased wages must result from somewhere; it doesn't just magically appear from nothing. Washington often forgets this simple fact as well. As mentioned, some companies might want to raise their prices which offsets the expense towards the consumer, thus the entire utility (benefit) to society is decreased. Employers, when the minimum wage is raised sufficient, could even go as far as to outsource their labor to foreign countries, hire illegal immigrants, or pay their employees beneath the table. As such, the only real groups I can think about that would actually reap the benefits of a raising with the minimum wage are illegal immigrants and workers in foreign countries.

Another group that might probably benefit is politicians, however they take advantage of just about any policy installed into effect. They in addition to their respective voters and supporters appear to believe they are on some moral high ground, constantly proclaiming that they wish to help teens and minorities. This really is ignorance at its best. Not only do they say one thing and do another, however they almost always don't even understand the ramifications of what they are doing.

People react to incentives. Raising the minimum wage gives more and more people the motivation to disregard pursuing an invaluable education. By doing this, young adults set themselves up to 'live poorly' in the long run. With no, minimum wage hikes usually do not decrease poverty. Sure, previously poor families that experience a pay raise may escape poverty, but previously non-poor families will ultimately fall below the poverty line as per the aforementioned incentive effect, thus the absolute minimum wage hike hurts everyone in society in the long run.

I might even go in terms of to debate that in theory there shouldn't be minimum wage, understanding that wages in most fields (obviously there'd be exceptions) needs to be allocated in line with the productivity of the employee. This occurs in neuro-scientific sales using a thing called commission. This system will allow the most efficient workers, basically the hardest workers, to earn the most money. If I were an employer, I might absolutely implement this method in every way you can. In my opinion this method will make employers more profitable as well, that is again a good thing for society. After all, we all do live in a world encompassed by meritocracy and credentialism, for the most part. It's fair, as high pay rates are available to those that desire it probably the most. How's that for morality and economics!