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Minimum Wage Research Paper

Effects of Raising the Minimum Wage

Minimum wage policy is a need to be well addressed and resolved for once because it forms the foundation of compensation for all workers in the United States. Recently, the minimum wage debate has received enormous interest from the policy makers. This is because by raising the minimum wage for workers there are some controversies that will arise. The controversy over this issue mainly lies on the impacts of the rise in minimum wage policy. Some of the anticipated consequences of increasing the minimum wage include loss of jobs and the potential magnitude of this unemployment, especially in the low-skilled workers. The research paper focuses on the effects of the rising the minimum wage. The effects considered pertains the workers, economy, and the businesses. Whereas some researchers believe that rising minimum wage has positive consequences, many have opposing ideas.

The minimum wage policy has a long history. For instance, in the US, the federal minimum wage was established for the first time in 1938. The figure has evolved over the years due to the changing economic times. Currently, the minimum wage in most states in the US is $7.25 per hour. However, the figure varies across the US, with more than 29 states having a higher federal minimum wage. Some political ideologists, in their campaigns, have advocated for the raising of the minimum wage without considering the possible consequences of such move.

The effects of raising the minimum wage to workers mainly affect the low-wage workers. The impacts are realized in two ways. First, the workers have an advantage of getting higher salaries and wages. The higher pay improves the family’s income of these employees. Their living standard is improved, and some of these workers would live above the federal threshold of poverty. According to Congressional Budget Office report, the $ 10.10 policy of raising the minimum wage would have several impacts. For instance, the raised earnings for the low-wage employees resulting from this policy would amount to about $ 31 billion.

Nevertheless, the same report notes that only 19% of this total increase in earnings would accrue to the families living under poverty threshold since most of the affected workers do not come from low-income households. Furthermore, about 29% of the $31 billion accrue to families with earnings above three times higher that of the poverty threshold. Therefore, if increasing minimum wage is motivated by the intention to reduce poverty, the aimed goal would not be achieved significantly if the results of this report are to be considered. On the other hand, there is a possibility that this policy may negatively affect some of these low-wage workers, and the total earnings may be reduced. Due to the increased cost of labor, some of these low-skilled jobs would be phased out. In this way, the affected workers may experience a substantial reduction in their income due to the joblessness. According to Congressional Budget Office (CBO) report, increasing the minimum wage from the current $ 7.25 to $10.10 would have a significant effect on the employment. According to the report, there would be a reduction in employment by about 0.3%. Higher-wage workers are also somewhat affected by this policy. A small number of the higher-wage workers retain their jobs, and their earnings may be increased as a result of raised demand of commodities and services as a result of the increased income by low-wage workers.

Also, the economy of the country is affected by the increase in minimum wage because the government will need to increase its expenditure on salaries in order to meet the minimum wage. The increased in the income of federal and other low-wage workers results in the overall increase in prices of goods and services due to increased demand. The government buys some of these good and services. Therefore, added costs are incurred by the government as a result of expenditures goods and services and in paying the federal low-wage workers. The discretionary appropriations need to cover for the additional costs. Therefore, the likelihood of having federal budget deficits is increased.

However, the raise in the minimum wage may be beneficial to the economy. A healthy national economy is not determined by the spending power of the minority that may be getting huge salaries or wages. In the US, as is the case with the rest of the economic powerhouses in the world, the middle and lower wage earners determine the economic strength and trends. The influence of the two groups results from their abilities to affect businesses at the community level. Individuals in the middle and lower wage categories not only run the business on the small scale or community level but also spend in the businesses. If the minimum wage bill is raised, the lower wage workers will have more money to spend. The increase in spending power is critical to the strengthening of the economy because more people and more will be available for economic activities. In the long run, the rise in minimum wage will boost the economy.


Some of the most significant effects of raising the minimum wage for all federal workers will be felt at the business level. In the USA, the fast food restaurants form the largest share of businesses where individuals with no experience, such as teenagers, can get paid per hour for the services they offer for the businesses. However, it is important to note that the primary aim of any business is to make the profit and be able to expand to more customers and wider geographical locations. The raise in the minimum wage would lead to businesses raising the prices of the goods that they sell. An American will have to spend more money buying a hamburger than it was previously because businesses have to keep operational. The most logical way for the businesses to meet the extra costs of paying the workers is to raise the prices of goods. The increase in prices will provide a pool of money from which the business may be able to fulfill its targets while at the same time remunerating its employee by set minimum wage.


Secondly, to keep operational and avoid making losses because of increased expenditure courtesy of increased minimum wage, businesses may be forced to cut down on the number of people that they can employ. Apart from the rise in the unemployment by a 0.3%, the quality of services at the businesses may get compromised. Businesses in the US are already operating on less manpower with only a few enterprises having sufficient employees for optimal productivity. When some of the lower wage earners are phased out as is expected, the businesses will require the remaining personnel to fill the voids left behind by those who were retrenched. Eventually, the employees of the businesses will be overworked in an attempt to keep business activities before the phasing out. Overworked employees eventually get unproductive and jeopardize the quality of services or goods offered by the business. Similarly, the business losses some customers and might eventually shut down because of inability to sustain operations.


Critics of the raise in the minimum wage argue that the minimum wage kills the spirit of professionalism and ambition for the skill with specialization. They argue that not only should the minimum wage not raised, but also be scrapped out of legislation. The minimum wage has put unnecessary economic pressure on businesses that end up shutting down because of incurring more costs than the services the employees offer. They give an example of a teenager who spends a couple of hours not focusing on the job and yet ends up being paid per hour. Secondly, as a way of encouraging learning and internship, individuals should not be paid when they are still unskilled and dependent on others around them to be productive. Critics of the minimum wage increment claim that such a venture is entirely unwarranted because Americans have the potential to get fulltime employment on salaries or create self-employment.


The critics fail to understand the nature of the American society. The society has been tailored towards admiration for economic supremacy and stability. Not all of the citizens get equal opportunities and resources resulting in a significant number of young people being unable to get higher education because of the expensive tuition fees required for colleges. Over 40% of those people working on low wages are young people below the age of 25 years. The statistics mean that whatever happens concerning the minimum wage will greatly affect the young population that is important for the future of the US. Individuals below the age of 25 are mostly still in school or college and depend on jobs at fast food restaurants and other businesses to sustain themselves and pay the tuition fees. Hence, an increase in the minimum age will end up benefitting more of the young generation ensuring that they complete their studies and get enough skills to get permanent jobs that have stable salaries. Similarly, when compared to the inflation that the US has experiences since the 1960s, the minimum wage should be at $10 per hour. It is surprising that in spite of the inflation and increase in the cost of life in the nation, the minimum wage remains at such a low value. The minimum wage should be raised to enable Americans to handle the inflation in goods and services.


Therefore I totally disagree with suggestions that minimum wage of workers should be increased because a critical analysis of the impacts of increasing the minimum wage reveals that negative impacts of the move are more compared to positive ones. Instead I advocate for the government to use different means in their efforts to improve the working conditions of workers.


In conclusion, the effects of raising the minimum wage are both positive and negative depending on analysis basing on the aspects at stake. Raising the minimum wage hourly may confer positive impacts such as a stable economy due to increased availability of money hence more spending and growth of businesses. Similarly, more of the low-wage workers who live in poverty will be able to cross over the poverty line. However, phasing out of workers along with increased prices for goods and services may result in the increase in minimum wages. Rising of the minimum wage is an important step by the government that needs early employment of precautionary factors against possible negative effects.

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