FREE ESSAY ON MINIMUM WAGE

MINIMUM WAGE

"An increase now will boost income for the poorest workers without the danger of creating
more unemployment.", states the New York Times in September 1999. Is this statement about
an increase in minimum wage really true? There are two sides to the debate about minimum
wage that both hold valid points.
The minimum wage is a major issue in the world of economics and politics. Political
figures often prey on the public's general ignorance of economics and promise to increase
the minimum wage. Economists ,on the other hand, view the long term effects and see the
damage it can cause.
David Card and Alan Kruegur, two economists at Princeton University conducted a study in
April 1992 on New Jersey's 18% minimum wage increase while Pennsylvania's minimum wage
remained the same. They measured the change in employment in the state's fast - food
restaurants between February and December that year. Card and Kruegur found that the
number of jobs grew in restaurants where pay had to rise, compared with those already
paying more than minimum was and compared with joints in neighboring Pennsylvania, where
the minimum did not change. The study also found no difference between high- and low-
wage states. 
Most people would be delighted to here the above. They would receive more money and their
standard of living would increase. But most people do not take into account the negative
side effects of increasing the minimum wage. 
The survey taken by Card and Kruegur was done over the telephone. Fellow economists
charge that the questions were vague and errors crept into the numbers. Another study was
done using the businesses payrolls found that New Jersey fared far worse than
Pennsylvania.
Positive effects of the minimum wage can be the obvious; more money for people. They
would have more money to spend , the economy would boom and everyone would be happy. Not
so; in fact, this would only encourage inflation and increase prices. Money become lesser
in value and producers would have no choice but to raise prices in order to make profit.
Another negative aspect of raising the minimum wage is unemployment rising. Supply of
workers would exceed the demand for workers. Employers would only be able to hire a
lesser number of workers. It may also influence teenagers to leave school for a high
paying job and make it more difficult for teenagers looking for work to find jobs. Low
skilled workers would be left without jobs, seeing as how it only make sense to hire the
higher skilled worker verses the lower skilled worker.
The minimum wage debate is a touchy issue among many economists and political figures.
While there are some positives aspects, the negative far out away the positives.