The Negative Effects of Minimum Wage Laws

Since 1938, the Federal Government has implemented minimum wage standards, and almost all states implement their own minimum wage standards. These laws prohibit employers from paying wages below the stipulated levels. The objective is to help workers, but decades of economic research showed that minimum wages will hurt normal workers and a broader economy. Minimum wages in particular restrict the employment opportunities of low skill workers, young people and minorities, which is a group often used by policy makers to help implement these policies.

There is no "free lunch" when the government sets the minimum wage. If the government requires that certain workers obtain higher wages, the company adjusts to pay higher costs, such as reducing employment, shortening employee hours, reducing benefits, and higher price claims I will. Some policy makers may think that companies simply absorb the cost of minimum wage growth by reducing profits, but this rarely happens. Instead, the company responds to these tasks by reducing employment and making other decisions to maintain net income. These behavioral reactions often offset the favorable labor market outcome desired by policy makers.

This study reviews the economic model used to understand the minimum wage method and validates empirical evidence. It explains why most academic evidence points out the negative impact of minimum wage and discusses why some studies produce positive results at first glance.

Some Federal and state policy makers are currently considering raising the minimum wage, but such policy changes are particularly devastating in today's economic downturn. Instead, federal and state governments should focus on policies that generate faster economic growth, which will lead to higher wages and more opportunities for all workers.

Card and Kruger extended this first article in the 1995 book "Myth and Measure: New Economics of Minimum Wage". They believe that the minus employment effect of the Minimum Wage Act is rare, even if not present. For example, I am looking for a rise in New Jersey's minimum wage in 1992, a rise in California's minimum wage in 1988, and a rise in the federal minimum wage in 1990-91. In addition to their own research findings, they also reanalyzed earlier studies using the latest data. And with larger data sets, the results of previous negative employment effects are often not corroborated.

What is the impact of the minimum wage law? The minimum wage is the minimum hourly amount that government designated employees pay to their employees. The minimum wage is based on the idea that the employer is responsible for realizing a reasonable standard of living for employees. The minimum wage method has a direct impact on most industries as it may reduce the budget. Therefore, the minimum wage is still a problem for people to study.

How can we achieve such a significant improvement in living standard without adversely affecting employment? The answer is that the growth in minimum wage is likely to result in negative and positive employment effects. Higher minimum wages result in automation, increased worker productivity, and a slightly higher price, all of which are negative. Increasing the minimum wage also lowers the turnover rate of employees, which reduces the cost of employers, enhances the purchasing power of workers and stimulates consumer demand. These are positive effects. In California and Fresno County, these adverse effects on employment are in a positive relationship.