Question

Discuss the pros and cons of raising the Minimum Wage to double digits. You must conclude with which side you are on and defend your choice.

REQUIREMENTS  

at least two paragraphs with 4 to 6 sentences.

1. at least 3 pro and 3 con arguments
2. take a side
3. Rationally explain their decision

Answer 1

A minimum wage is the lowest wage per hour that a worker may be paid as per mandated by federal law. It is legally mandated price floor on hourly wages, below which non exempt workers may not be offered or accept a job.

Minimum wage laws were first introduced in Australia and New Zealand in attempt to raise the income of unskilled workers. Now a days most modern developed economies as well as many under developed economies enforce a national minimum wage.

Pros and Cons of Raising Minimum Wage

Pros:

· Productivity Increase - Raising the federal minimum wage will stimulate consumer spending, helps business bottom lines which result in growth in economy. A modest increase would improve worker productivity and reduce employee turnover and absenteeism.

· Reduce Poverty - Raising the minimum wages allows those who make minimum salaries to keep up with inflation. It will also help those who need it the most such as single mothers and minorities.

· Counter Balance to Monopsony – Workers employed by monopsony firms receive wages that are less than their MRPs. In a monopsony market, a minimum wage above the equilibrium wage could increase employment at the same time as it boosts wages.

Cons:

· Unemployment - Raising minimum wages will hurt the economy and reduce the amount of available jobs. If labor markets are competitive, a minimum wage could cause unemployment because firms will demand less labor and higher wages may encourage more workers to supply their labour.

· Black Market – A minimum wage may increase the number of people working on black market so firms can avoid paying the legal minimum.

· Cost Push Inflation – A minimum wage can cause cost push inflation. This is because firms face an increase in costs, which are likely to be passed onto consumers.