Minimum Wage Impact

Impact of Minimum Wage on Employment in the U.S

Introduction

Minimum wage refers to a minimum price that is basic and imposed by the government for a particular product or service. Minimum wage is set to ensure that people receive a fair wage for the jobs that they do. It is used to ensure that citizens of a nation can maintain a minimum quality of life. Different states have different minimum wage laws. There are some states that have no minimum wage laws at all, i.e., Alabama, Louisiana, Mississippi, South Carolina and Tennessee. There are states whose minimum wage is lower than the federal wage and as such the federal minimum wage is used. These are Arkansas, Georgia, Minnesota, and Wyoming. There are states where the wage is higher than

However, questions are still asked if an increase in the minimum wage reduce the employer profits resulting to loss of jobs. According to NFBI, National Federation of Independent Business, those who own small businesses don’t have the resources to absorb an increase in the minimum wage because most of the earnings go back to the small economy. Thus, the argument those hiring and promoting employees will slow down of the sector. However, there studies suggest that an increase in the minimum wage decreases the employee number due to expenses associated with the hiring and training new

The law posits that as supply increases, while other things are kept constant, there is a decline in price and vice-versa. As demand increases, while other things are kept constant, the price tends to increase and when demand declines, the price declines. The economy achieves a state of equilibrium between quantity and price when there is a balance between demand and supply. The law of supply and demand has a big impact on the labor market and consequently, the economy. An increase in wages leads to a decline in supply of goods and services because labor is considered as a business cost. However, a reduction of labor costs also results in a decline in demand because the supply side creates the demand equation. The reason for this is that as costs of business are reduced by reducing the cost of labor, the result is that there are jobs lost and therefore there is less money on the demand side as well. Where there is a shortage of skills, high wages must be paid to ensure that workers are attracted. However, low skill jobs have many people who can work and therefore the result of this is low wages for such tasks (Gerhard, 2009). The impact of this on the economy is expected to be such that where the wages rise then companies would reduce costs by reducing the number of workers thus increasing the unemployment rate. However, this depends on the nature of the jobs. In a state where the jobs created require high