Minimum Wage Analysis

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In this paper, I will show that minimum wage creates unemployment, raises prices, and reduces growth in the economy. Minimum wage is a long supported fiscal policy that destroys jobs and opportunities while trying to help the poor. Although in theory, minimum wage should increase the amount that low paid workers are making, this does not end up being the case for them as a group. Because the cost of labor rises, fewer jobs are being created and some jobs are being destroyed.
In the United States, a minimum wage has been federally mandated since 1938 with The Fair Labor Standards Act. This act set the minimum wage at 25 cents. Currently the minimum wage is $7.25 per hour nationally, but some states have specific minimum wages such as Washington …show more content…
These costs can be passed on to consumers in the form of price increases. Its effects can be seen often. Recently, Chipotle has increased its prices by as much as 14% in San Francisco and many other cities due to the rising labor cost from minimum wage. [Worstall, 2015] Some may argue that this is ok because as wages rise from a minimum wage increase, people can afford to spend more. However, this is incorrect because the increase in wages would only be noticeable in those working at or near the minimum wage level, which is a fairly small percentage of the total population. This means that minimum wage is simply raising the cost of living for everyone while only balancing it out for minimum wage workers. Another problem with this increase in prices and wages is that it moves jobs and production out of the US into other countries with more competitive pricing. Again, this hurts the economy …show more content…
This is problematic because they are not all in the same state of economic affairs and in some places workers have to be paid less to make a profit. One example of this is Puerto Rico. In Puerto Rico, the minimum wage is 77% of the median wage, and this means that labor is too expensive because the cheapest labor is only slightly cheaper than average. This makes it hard for Puerto Rico to compete with other islands in the Caribbean. This leads to higher prices for hotels and travel. Because things are more expensive, people choose to go to other islands that are cheaper. As they are generating less money, the hotels cannot expand as easily to create new
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