http://online.wsj.com/article/SB10001424127887323478004578302510280314712.html?mod=hp_opinion
The decision to increase the minimum wage seems a very political one. It offers few if any advances in the overall level of welfare of the nation as a whole and seems to be rushed. The increases might be a welcome development in regions of the country where a boom is being experienced and where this executive order would help raise the nominal wage to be more in line with what the real wage should be. But, in the struggling areas where unemployment is still high and few workers are struggling for very few jobs, the proposed wage increases would only serve to hurt the populace.
ceteris paribus, if the current real wage earned is too little to attract workers which does not seem to be the case) then an increase is needed and would help attract labor into the market and raise the GDP. If however, the current real wage has workers struggling to find jobs due to few positions available, then an increase in the wage rate would only lead to an increase in the unemployment rate and subsequent misery of the population.
As a political strategy this seems friendly to the voters but like every other political move not backed by economic analysis, this would backfire and lead to greater losses.
Absolutely true , this is a really good article and relates really well to what we have been doing in class. A rise in minimum wage would lead to structural unemployment in places where people are finding it hard to find jobs.
ReplyDeleteSure, it would make a difference to some people, but firms will hire till MPL=real wage, and they will do this regardless if they want to maximize profit. Sure, some people may lose job, but these are, as the article says people who don't have a high skill set...if anything this raise would be an incentive for them to learn something new and result in an overall better economy. Besides, only teenagers are really affected by this, and teenagers normally work part-time.
ReplyDeleteThis is another example of the illogical interaction between politics and the economy. It seems that we often see politicians using something like a raise in the minimum wage--which sounds like an improvement to an untrained ear--to improve their public standing. But will the improvement in the public eye be worth the jobs that will inevitably be lost in lower income regions?
ReplyDeleteAlthough raising the minimum wage will not effect those who work above entry-level positions in the working force, it may very well increase the prices of goods purchased every day. If fast food establishments have to start paying their employees more, this will increase the prices they must charge for their products. I believe this will hurt businesses in the long run.
ReplyDeleteIn my labor economics class, we have learned that a significant portion of low wage earners (people earning below $8.50) are teenagers! So raising the minimum wage is mostly going to benefit your younger siblings working in restaurants/fast food places. These jobs have an elastic demand, so an increase in wages makes the labor demand elastic too. Many teens will find it hard to get a job, or will simply be laid off if the minimum wage is increased.
ReplyDelete