Question

Does the Minimum Wage create or detroy jobs in our economy? How so? In answering this question, please provide specific examples.

Answer 1

The point is that poor and middle-class families continue to spend more of their income than the rich, because they often struggle to fulfill basic needs. Thus, by taking money from companies and giving it to their worst-paid workers, raising the minimum wage might, in theory, increase consumer spending which in turn boosts the economy and creates jobs. Some businesses raise their prices when wages go up, which leaves their customers with less to spend elsewhere. But raising the minimum wage to some point merely shuffles money between two separate sets of customers.

One reason they find that raising the minimum wage would plump up spending so much is because it would give workers the ability to put down payments on big-ticket items such as cars. Later, when they begin to make loan payments, their expenses will go down. Minimum wage hike offers support for a year or two, then acts as a further drag on the economy.

However, raise the minimum wage beyond this point and you are in a dark abyss of evidence where there may be significant losses. The costs to low-wage workers at that point could outweigh the benefits of the policy. And the greater the raise, the greater the risk.