Archives - Economics: Page 11
Author: Thrty2Mars (Wed Jan 10, 2007 6:10 pm)
Title: Minimum Wage Increases Lead to Unemployment
It will never cease to amaze me how little people know regarding economics. When we are talking about the minimum wage, we are really referring to labor costs to business owners. When a state raises this minimum wage, it forces businesses to pay their employees more money. While this may seem like a great situation, it rarely ends that way. What many people lack the capacity to understand is that the basics of economics stress that a balance, or equilibrium, will be maintained naturally. A national minimum wage is a nice thing to have to safeguard against employers completely taking advantage of workers who have no other choice for employment. But that doesn't mean we should go around increasing this number arbitrarily from time to time. The reason is very simple, and I hope some people actually listen.
When New York raised the minimum wage from 6.75 to 7.15 recently it caused business owners to search for ways to cut costs. If no viable options exist (and none should if the business owner was planning on earning a profit) the only recourse left is a layoff. That's right, New York was aiming to increase the standard of living for it's lower class citizens, and instead, sent more of them to the unemployment office. A sure-fire way to increase worker's wages is to stimulate the economy and thereby increase the profits of individual companies. Forcing business owners to absorb higher labor costs will only force them to fire people. They could, of course, turn around and raise their prices to customers, but economics is at play there too.
The equilibrium for prices in any given market say what average prices are acceptable. If a manager raises his/her prices too far above this market average, expect demand to drop sharply. In conclusion, minimum wage is directly related to employment levels. Workers will be fired, or costs will rise for consumers, either way the scenario plays out, it's not what we want.