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Who is helped and who is hurt by the minimum wage?

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Mizdee | Student, Undergraduate | (Level 1) Valedictorian

Posted July 31, 2012 at 2:36 PM via web

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Who is helped and who is hurt by the minimum wage?

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Lorraine Caplan | College Teacher | (Level 2) Senior Educator

Posted July 31, 2012 at 2:53 PM (Answer #1)

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To some degree, companies, workers, and consumers are hurt by the minimum wage.  Companies can be forced to pay more than supply and demand would dictate, and the minimum wage can create higher unemployment because companies will try to make do with fewer workers.  Consumers are often harmed because the additional cost to a company is passed on in higher prices. 

On the other hand, the minimum wage is helpful to companies and workers in some ways, although the benefits to consumers are more philosophical than real.  A company that pays minimum wage (Federal) can participate in interstate commerce and possibly have a more satisfied workforce, with employees performing better than they otherwise might.  Employees are closer to a "living" wage when they receive minimum wage, and thus, they are one step closer to being out of poverty.  Whether or not consumers like feeling better purchasing products that are produced as a result of minimum wage is an interesting question.  We say that we don't want to purchase products made by children who get cents per day for producing them, but in fact, these products seem to sell just fine. 

This is an issue often discussed by economists and political policy makers, the degree to which a minimum wage is helpful or harmful.  At this point, the minimum wage seems to be a concept that is here to stay, with no party going on record right now as opposing it. 

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mwalter822 | Teacher | (Level 2) Educator

Posted July 31, 2012 at 2:59 PM (Answer #2)

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The fact that there is a minimum wage is not very controversial by itself. Most people realize that, to keep businesses from exploiting certain workers in certain situations, there must be a level that employers must not go below when paying workers.

Other aspects of the minimum wage generate more argument. We hear these positions every time this issue is debated.

On the one hand, how can someone possibly subsist on a wage that is below a “minimum”? The answer is that they cannot, that’s why it’s called a “minimum.” But as inflation eats away at real wages, the minimum wage eventually becomes less than the real “minimum.” Supporters of periodic increases in the minimum wage site this as the reason that the wage needs to be increased from time to time, like a cost-of-living increase for other workers.

Opponents always say that raising the minimum wage will hurt the economy is several ways.

  • It will cause many businesses, small businesses in particular, the lay off some workers to make up for the increase in what they have to pay in salary.
  • Businesses will simply pass on the higher cost of paying workers to their customers in the form of higher prices.

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