Impacts of Minimum Wage Increase.
Impacts of Minimum Wage Increase: In the US, workers are generally entitled to be paid no less than the statutory salary amount. Recently, the U.S president announced a wage increment of $15 per hour, while in some other nations; the minimum wage levels are higher than that of the federal state. The wage increment of $ 15 will have do more harm than good to the citizens and the economy as well.
The wage increase to $15 per hour will create unemployment for most unskilled and semiskilled workers and for the youth because most firms will be unable to offer the wages at that rate, in order to maximize on the profits
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This implies that as the cost of production increases, the profits remain at a constant (k), so in order to maximize on profits, by reducing the labor cost, the firms reduce the working hours or lay off some employees.
On the other hand, increase in the wages will make prices of restaurants rise simultaneously, because the purchasing and the spending power will be high for the workers.
Increasing the wages of consumers means that that their living standard rise as well, so does the spending power. It does not increase production to firms but economic only reduces economic growth due to unemployment. In the competitive labor market structure, the wage increase leads to more unemployment because the market is adjusting freely and is above the equilibrium point.
United States Minimum Wages.” Minimum wage rate is increasing.” Las Vegas Review journal. June 26, 2010. print
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