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“An increase now will boost income for the poorest workers without the danger
of creating more unemployment.”, states the New York Times in September 1999. Is
this statement about an increase in minimum wage really true? There are two
sides to the debate about minimum wage that both hold valid points. The minimum
wage is a major issue in the world of economics and politics. Political figures
often prey on the public’s general ignorance of economics and promise to
increase the minimum wage. Economists ,on the other hand, view the long term
effects and see the damage it can cause.
David Card and Alan Kruegur, two
economists at Princeton University conducted a study in April 1992 on New
Jersey’s 18% minimum wage increase while Pennsylvania’s minimum wage remained
the same. They measured the change in employment in the state’s fast – food
restaurants between February and December that year. Card and Kruegur found that
the number of jobs grew in restaurants where pay had to rise, compared with
those already paying more than minimum was and compared with joints in
neighboring Pennsylvania, where the minimum did not change.
The study also found
no difference between high- and low- wage states. Most people would be delighted
to here the above. They would receive more money and their standard of living
would increase. But most people do not take into account the negative side
effects of increasing the minimum wage. The survey taken by Card and Kruegur was
done over the telephone. Fellow economists charge that the questions were vague
and errors crept into the numbers. Another study was done using the businesses
payrolls found that New Jersey fared far worse than Pennsylvania. Positive
effects of the minimum wage can be the obvious; more money for people. They
would have more money to spend , the economy would boom and everyone would be
happy. Not so; in fact, this would only encourage inflation and increase prices.
Money become lesser in value and producers would have no choice but to raise
prices in order to make profit.
Another negative aspect of raising the minimum
wage is unemployment rising. Supply of workers would exceed the demand for
workers. Employers would only be able to hire a lesser number of workers. It may
also influence teenagers to leave school for a high paying job and make it more
difficult for teenagers looking for work to find jobs. Low skilled workers would
be left without jobs, seeing as how it only make sense to hire the higher
skilled worker verses the lower skilled worker. The minimum wage debate is a
touchy issue among many economists and political figures. While there are some
positives aspects, the negative far out away the positives.
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