What You Don’t Know About Raising the Minimum Wage

              A commonly made suggestion is that our country’s minimum wage policy should be raised;

however, when natural economic effects are more closely analyzed, raising the minimum wage

would result in some unwanted consequences. Two of the more obvious ones are the loss of some

low-wage jobs and an increase in inflation. I am not suggesting that we never raise the minimum

wage, but knowing all of the facts is absolutely crucial before assuming that making this change will

eliminate poverty in America.

                To begin our simple analysis on how a rise in minimum wage would result in job-loss, think about the structure of a basic business. A company has many expenses, one of which is paying its employees’ wages. In a situation where this expense is increased, company profit is naturally lowered. In order to compensate for this, one solution found is to cut some jobs that aren’t completely necessary (Saltsman, 2013). Job loss is not an intended consequence of a minimum wage increase, but it results from a practical business decision. The workers who happen to remain in the workforce take home a higher net pay, but those who lost their jobs are now in a fix.

                The next result from raising minimum wage is an increase in our economy’s inflation. A business, in order to compensate for an increased expense on wages, could choose to increase the prices of products. Now with increased prices, employees who bring home a higher net pay don’t have as much spending power as they should. This whole process lessens the value of the dollar, also known as inflation. This means poverty isn’t eliminated at all in the long run. Here is a quote that summarizes the entire process. “An increase in the federal minimum wage did create an increase in production costs, which subsequently resulted in an inflated price for consumers” (Pollick, 2014).

                Both of these economic effects that come from increasing minimum wage are very real. They seem to get overlooked because it takes a while for them to show up in our economy. Everyone likes the idea of taking home more money for the same amount of work, but the issue of poverty does not get solved. To cover the added cost in wages, companies can either eliminate some jobs or increase prices, causing inflation. Analyzing all of the effects is extremely important before making a huge decision like raising the minimum wage. 

                                                                                References

Pollick, M. (2014, September 13). Does raising the mimum wage cause inflation? Retrieved from

            Wise Geek: http://www.wisegeek.com/does-raising-the-minimum-wage-cause-inflation.htm

Saltsman, M. (2013, April 17). The record is clear: Minimum wage hikes destroy jobs. Retrieved from

            Forbes: http://www.forbes.com/sites/realspin/2013/04/17/the-record-is-clear-minimum-

            wage-hikes-destroy- jobs/