Economic Effect Of Minimum Wage Essay

Economic Effect of Minimum Wage During the Great Depression, many people were faced with unemployment and desperately tried to seek employment. Many employers tried to advantage of the labor market and hire for very little pay wages. In order to prevent the exploitation of cheap labor, the United States stepped in and passed the Fair Labor Standards Act of 1938, which dictated a minimum hourly rate of $.25 cents per hour. David Cooper, senior economic analyst and deputy director at Economic Analysis and Research Network at the Economic Policy Institute explains, “Without a wage floor, employers would continue to pay less and less, destroying the purchasing power of the consumers who would make less money.” (Dixon, 2017, para. 2). The principal of minimum wage is one of necessity for several reason including ensuring workers earn enough to live and to protect taxpayers from employers exploiting workers to get something for nothing. When analyzing Minimum Wage,
Therefore, laborers would benefit when the minimum wage rate is at a level where the cumulative demand for labor at a low wage is unitary elastic and would additionally benefit by increases in the minimum rate provided the cumulative demand for labor is inelastic. Moreover, some economists feel there is a close correlation between raising the minimum wage rate in order to improve the livelihood of workers at a low wage and the inelasticity of the demand for their labor (Danziger, 2009). However, labor with a downward sloping demand curve, legislation that raises laborers wages above the equilibrium will unavoidably lead to the loss of jobs. Therefore, it exists a crucial value of elasticity of labor demand such that the rise in the minimum wage rate makes laborers with low pay better off for higher elasticities, but worse off for lower elasticities (Danziger,