Of the 48 contiguous states of the United States, 10 states regularly increase minimum wage to keep up with inflation, according to the National Employment Law Project. This means that minimum wage workers in the remaining 38 states are below the poverty line. These workers rely on the government for the remaining funds to maintain a basic livelihood. More surprisingly, minimum wage workers are no longer just teenagers aiming for a quick buck over summer. Now, 3.8 million American workers, two-thirds of whom are women, rely on a minimum wage job for their daily sustenance. With these facts in mind, the age-old argument of understanding and reacting to the consequences of setting a minimum wage fall into perspective. As setting a minimum wage began the process of labor equality in Massachusetts in 1912, increasing the minimum wage regularly to keep up with inflation is priority because it can help working families, businesses and the American economy recover.
Many economists have argued increasing the minimum wage will further harm struggling businesses and only serve to increase unemployment. They have stated that as businesses cope with the new expenses, they will be forced to cut costs through other methods as seen in the diagram below.
These economists have followed the textbook model of price vs. quantity, that shows that setting the minimum wage higher will cause a period of unemployment, because demand for labor will be greater than supply of labor. This can be seen in the mainstream model of economics below.
However, recent research has shown that by improving the standard of life for their employees by increasing the minimum wage, the businesses and subsequently the American economy will benefit. By increasing the minimum wage, households that rely on income from minimum wage workers would be able to meet their basic needs, while having extra money. Research has shown that these families are more likely spend extra money immediately to obtain...
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