Economic Impact of Federal Minimum Wage

Minimum Wage代写 The increase in the minimum wage is a form of price floor which fixes market prices below which labor should not be sold.


The increase in the minimum wage is a form of price floor which fixes market prices below which labor should not be sold.

The minimum wage is designed to help increase the income of the low-paid. The disadvantage of a minimum wage is that it increases costs for employers and could lead to lower levels of employment as some firms will not be able to afford to pay the higher salary (Pettinger, 2019). Labor market functions are in equilibrium at W1Q1 (figure 1 below) through the interaction of workers who are the supply of labor and firms, which are the demand for labor. The economics of demand and supply at higher minimum wage (NMW) above the market equilibrium will make the supply of labor to increase and demand to reduce. The reason being, more people will be willing to work at higher wages including teenagers while businesses will cut on labor spending. The quantity demand for a higher minimum wage is Q2, while the quantity supplied is Q3. There is excess supply of labor. The result is that those who are in employment continue to earn well while those new in the job market remain unemployed and hence earn zero wages.

Minimum Wage代写
Minimum Wage代写

Therefore, government intervention to raise minimum wage is a benefit to workers.  Minimum Wage代写

However, not all workers will feel the benefits due to the supply surplus in the market. The minimum wage will ensure that those in employment continue to get better wages than before. The policy will force businesses to cut spending on labor and hence reduce the overall demand for labor. There will be more labor than required in the market causing unemployment.

The most negatively affected group of workers are the teenagers and interns who have not needed experience and skills to sell at prevailing labor market prices. Thus, the equilibrium wages for teenagers and interns are lower than the minimum wage. This group is willing to work for lowers wages or even for free to get the requisite skills and experience. Therefore, the minimum wage is more binding than any other group in the labor market.

Unfortunately, teenage unemployment increases with an increase in the minimum wage.  Minimum Wage代写

The intervention alters the quantity supplied. When the wages that teenagers can be paid increases, it will increase the number of teenagers will and seeking jobs. The rise in minimum wage influence who gets hired and who does not because the supply is high.

Minimum Wage代写
Minimum Wage代写

Additionally, an increase in minimum wages is believed to have insignificant impact on the prices of goods and services (Basker & Khan, 2016). The policies on minimum wages are mostly based on the inflation levels and are implemented gradually with notice to businesses for adjustments. Also, the cut on spending on employment lower and increase in the utilization of current labor resources makes changes in minimum wages to have little impact on the prices of products and services.

Though minimum wage alters the normal functioning of the labor market.  Minimum Wage代写

It is believed to have better outcomes than when the market is left unregulated (Dixion, 2017). When people are desperate to look for employment, employers take advantage to pay little because the supply is high. Without regulation and due to high supply of labor, employers will continue to pay less and less, destroying the purchasing power of consumers. Naturally, labor market has a higher supply than the demand. Minimum wage is a remedy to workers’ exploitation.

References  Minimum Wage代写

Basker, E., & Khan, M. T. (2016). Does the minimum wage bite into fast-food prices? Journal of Labor Research, 37(2), 129-148.

Dixion, L. (2017). How does the minimum wage impact the economy? Retrieved from

Pettinger, T. (2019). Effect of minimum wage on economic growth, inflation, and AD/AS. Retrieved from


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