Should the United States pass a minimum wage that assures all workers earn a wage above the
poverty level? Defend your position using economic principles.
Response 1:
NO.
The united states should not pass the minimum wage bill because it will lead to unemployment. The perfect labor market equates to the same forces of demand and supply in the equilibrium. Increasing the minimum wage requires firms to increase employee wages, and in the long run, more workers will be encouraged to supply their labor. Therefore, if there is more labor supply in the perfect labor market, then there will be low demand for labor. This translates to less demand for employees since the supply would be more than the demand hence, resulting in the lack of employment.
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Secondly, an increase in the minimum wage will result in a lack of competitiveness between firms. If a firm does not afford to pay its workers the minimum wage as stipulated, then it may go out of business as the higher wages translate to high costs to the firm. This will eventually lead to the firm’s closure if it cannot afford to pay such high wages to its workers. If several firms are affected, then it might lead to their closure. The few firms that will be left operational will not be as competitive as before since there will be no competition from other firms in terms of costs and quality of products and in the long run, might result in the production of inferior goods.
Response 2:
Lastly, a high minimum wage means that the country will have higher levels of inflation. The cost of products will be increased to offset the high wages that workers should be given. This also means that the consumer will bear the burden of the increased wages due to increased prices of products. The costs of living would increase which further creates a need for another minimum wage for the consumers resulting to high levels of inflation in the country.