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Discuss the impact of raising minimum wages on minimum wage earners and economy as a whole - Essay Example

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[Name of Student] [Name of Lecturer] Essay, Macro & Micro economics [Date] The Impact of Raising Minimum Wages on Minimum Wage-Earners and the Economy Introduction Minimum wage is one of the most controversial issues not only in labor markets but also in the economic and legal arenas, where employees and their unions on one side, often face-off with employers to fight for minimum wage increments…
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Discuss the impact of raising minimum wages on minimum wage earners and economy as a whole
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Download file to see previous pages Increment of minimum wage has been a hotly debated issue not only by economists but also by the non-economist public (Neumark & Adams 6). On this issue, the non-economists have been largely pitted against the economists with the non-economists believing that raising minimum wage benefits employees and prevents employee exploitation by employers. On the other hand, economists are of the opinion that raising minimum wages actually hurt the very employees it is purported to help (Card & Krueger 20). This paper explores the effects of raising minimum wages for both the economy and minimum wage earners. Impacts of Raising Minimum Wages The first reason raising of minimum wages hurts the same people it is intended to help is that increasing these wages and creating laws that set them does not guarantee the public any more jobs. On the contrary, once minimum wages are increased, low-skilled workers are faced with the danger of being thrown out of the job market (Neumark & Adams 26). The reason for this scenario is that employers will raise the skill requirements and the levels of competencies and experience and align them with the newly increased wages. In other words, employers are not willing to pay more for an employee if he or she does not increase or add value to a product in a manner commensurate with the wage increase (Card & Krueger 20). In the opinion of economists such as David Bradford of Princeton, raising minimum wages is tantamount to asking an employee to look for a job that would guarantee the said minimum wage (Neumark & Adams 15). Otherwise, such an employee may not find any job, depending on his level of skill. According to time-series data from decades of studies, it has been proved that raising minimum wages has the effect of reducing employment (American Enterprise Institute 3). This assertion is true if the rate of job losses in the current economy is anything to go by. According to current job estimates, a 10% increase in minimum wages could translate into a decrease of between 1% and 2% in employment (American Enterprise Institute 4). Especially affected in this regard are young and unskilled workers, especially those from vulnerable and less academically and economically-endowed segments of the population. Besides increasing unemployment and job loss, minimum wage increment, especially the relevant laws, change workers’ systems of compensation. For instance, benefits such as free room and board, subsidized child care, on-the-job training, low-cost insurance, which are essential to low-waged and low-skilled worker compensations, are always negatively affected in cases of minimum wage increments. Employers have the tendency of controlling these benefits after minimum wage increments (American Enterprise Institute 4). In worse scenarios, when laws set minimum wages, some employers change full-time low-paying jobs into part-time high-paying jobs. Regrettably, there is rarely accompanying benefits such as reduced working hours. On-the-job training is the other aspect of low-wage employees that suffer reduction due to minimum wage increments (American Enterprise Institute 4). Hence, low-skilled workers lose their chance of improving their skills and opportunities to rise in rank. One benefit of reduced minimum wage, as opposed to increased minimum wage is that many employers prefer hiring unskilled workers and then ...Download file to see next pages Read More
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