The Impact of Minimum Wage on Unemployment
A minimum-wage hike is meant to increase the pay of workers who earn the least amount of money in the United States. Traditionally, minimum-wage workers are teenagers, unskilled workers and entry-level workers. Although there are many arguments for and against minimum-wage increases, the relationship between increases and unemployment seems to be the most debatable.
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Significance
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Minimum-wage increases are meant to ensure that the lowest-paid workers wages can keep up with the increase in the cost of living. Instead, there is evidence that minimum-wages increase might compound these workers' problems by resulting in unemployment.
Supply-and-Demand Theory
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One theory states that a higher minimum wage increases the number of workers wanting the job, because it means the same work at a higher rate. Employers, however, demand fewer workers because it becomes more expensive to keep the ones they have. Hiring more would seem unfavorable. Theory also states that workers who have jobs when the minimum wage increases are likely to find themselves unemployed afterward.
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Better-Choices Theory
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Another theory is that workers enter the workforce after an increase because of the instantly higher wages. This enlarges the pool of talent for one minimum-wage job. Thus, instead of taking the first teenager that walks through the door, employers can fill the fryer position with a college student who previously worked in the cafeteria to pay his tuition.
The Minimum-Wage Worker
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The opposing argument is that the worker displace by a minimum-wage increase is just a teenager or college student with a part-time job.
The Single-Mother Fallacy
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The opposition further tries to dispel the misconception that minimum-wage workers are mostly single mothers or married couples struggling to feed their families. Economist Reed Garfield wrote in his 1996 report to the U.S. Congressional Joint Economic Committee that 2.8 percent of workers at the time were single parents, and 1.2 percent comprised heads of households. He also stated that, at the time, only 9.2 percent of minimum-wage workers were full-time employees.
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References
- Photo Credit Image by Flickr.com, courtesy of woodley wonderworks
