A discussion on the problems associated with the minimum wage

Public policy perspective, and political perspective. As part of public policy, it reflects with various macroeconomic scenarios, such as the notion of social safety net, addressing inequality, and enhancing workforce productivity. As for the political aspect, it reflects on the events that have taken place since the Rana Plaza disaster that took place five years ago.

A discussion on the problems associated with the minimum wage

In some ways, it may be less about economics than attitude: Conservatives tend to view the minimum wage as an attack on free markets, while social progressives see it as a measure that can drive the economy and increase everyone's prosperity.

It's not a simple issue, and both sides can point to problems with the minimum wage. Increased Labor Costs The immediate issue with a higher minimum wage, if you're an employer, is the potential for your labor costs to increase. It's especially difficult if you're in an industry such as food service, where margins are already razor-thin and a lot of your employees earn minimum wage.

Even if you don't draw your employees from the minimum-wage pool, a hike in the minimum wage could make your employees unhappy with their compensation and force you to raise your own rates.


In the real world, larger factors might have more impact than raising the minimum wage. If the labor market is tight in your area, or if living costs make it impossible for low earners to live there, you might already have to pay more than the minimum wage.

For that matter, you might find that paying above the local average gives you a more stable and happier staff, and cuts down your recruiting and training costs. Driving Unemployment A second problem with the minimum wage is that it might increase unemployment. That's an argument free-market economists often put forward.

The argument is that there's only so much money for payroll, and if wages go up, business owners won't be able to afford as large a staff.

A discussion on the problems associated with the minimum wage

That's a valid concern, especially for small operators, though real-world data doesn't necessarily bear that out for the economy as a whole. Unemployment didn't spike until when the Great Recession disrupted most of the world's large economies.

Driving Up Pricing Classical economic theory also predicts that when wages go up, prices go up. That may be true, at least to a point, though economists are divided on the subject. Both sides can draw on studies and stats to make their cases, but that theoretical argument doesn't matter as much as your own experience, in your own business.

If payroll is one of your highest costs, and you employ a lot of minimum-wage staff, you might well find yourself needing to raise prices after a wage increase. If labor cost is a relatively small part of your operation, and you sell to a low-income demographic, you might find that a wage increase in the surrounding community actually increases your profits even at your current pricing.

Not Helping Enough People Critics of the minimum wage don't only come from the ranks of employers, economists and free-market social conservatives. Social progressives make the argument that the minimum wage applies to only a small percentage of the workforce, — less than 2 percent of workers receive the federal minimum wage — and that despite the heat it generates as a policy question, raising the minimum wage doesn't actually help many people.

This argument says that other interventions, whether in the form of tax rebates for low-income earners, health care or subsidized child care, may actually have a greater impact on poverty for a greater number of people.A minimum wage is a legal minimum for workers.

It means workers are guaranteed a certain hourly wage – helping to reduce relative poverty. However, a minimum wage could have potential disadvantages – in particular, there is the risk of creating unemployment as firms cannot afford to employ workers.

Watch video · The CEO of the chain that owns Hardee's and Carl's Jr. strikes back at critics over his position on raising the minimum wage.

Executive summary

Fine. What is the minimum wage anyway? Ah, good place to start.

A discussion on the problems associated with the minimum wage

The federal minimum wage is $ an hour, which means that depending on the city you're in, 60 minutes of work will just about buy you a Chipoltle burrito (without guac). By . Minimum wage is set by the government and it is the minimum amount of money that must be paid to workers.

It is illegal to pay less than minimum wage to workers. Minimum wage is set in order to alleviate poverty and reduce unemployment. The typical increase in the legal minimum wage associated with the proposed change to $ is of course lower than percent because some states affected by the change at the federal level already have state minimum wages exceeding $ States without a higher minimum than $ would experience the full increase.

Of those who do earn the minimum wage and would be covered by the new amount, very few live in poor households. Most are second or even third earners, with an average family income of $54, per year.

12 QUESTIONS - and answers - about a minimum wage increase in KC economy