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Minimum Wage Bill Advances: Whether a minimum wage increase would spur New Jerseys economy or kill jobs - Research Paper Example

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In a recent debate, the Republicans and Democrats disagreed over proposal to increase the minimum wage in New Jersey to $8.50 from $7.25 an hour (Kosters 114). In addition, the Republicans sought to provide a system that evaluates the annual cost of living and adjust the minimum…
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Minimum Wage Bill Advances: Whether a minimum wage increase would spur New Jerseys economy or kill jobs
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Download file to see previous pages Several economists have raised questions about its effectiveness in stimulating the economy. Since early 1990s, most economists and political analysts suggested that increasing the minimum wage destroys or reduces job opportunities. They all had a notion that if the cost of labor is artificially fixed, then the economy will experience a low demand for cheap human resources since the supply will be much higher. This is in reference to the classic law of economics that has lost its relevance in accounting for market forces affecting a modern economy such as that of New Jersey. The relationship between minimum wage and the rate of employment is not determined by the demand and supply forces of the market, but the market power of the employers. Increasing the minimum wage in New Jersey will spur New Jersey’s economy since low-income earners will have more money to spend to meet their basic needs hence boosting the local businesses in this region.
In 1992, the senate increased the minimum wage in New Jersey by 20% to level at $5.05. However, no changes were implemented in Pennsylvania as the minimum wage rate remained at $4.25 (Card and Krueger 45). A closer look at what happened in both States reveals an unusual trend in the rate of job employment. Contrary to the natural law of economics, food restaurants in New Jersey did not dismiss workers to maintain their nominal operational costs of running their businesses.
Although the cost of hiring unskilled labor became much more expensive, the rate of employment in New Jersey increased than in Pennsylvania. Even though several economists believe this is an isolated case, it proves that increasing the minimum wage does not necessarily lead to decrease in the rate of employment. A recent study by Boeri and Van carried out in May 2012 in New Jersey is an evidence that sharply contradicts the conventional conception that increasing the minimum wage reduces the rate of ...Download file to see next pagesRead More
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