The hike in minimum wage from $7.25 to $10.10 could negatively impact the economy as seen in the American Action Forum’s analysis of a $1 increase in minimum wage from 2013, which shows a “1.48 percentage point increase in the unemployment rate, a 0.18 percentage point decrease in the net job growth rate, a 4.67 percentage point increase in the teenage unemployment rate, and a 4.01 percentage point decrease in the teenage net job growth rate.”
With businesses having to provide employees with this new increased wage of $10.10, they will hire fewer people and some businesses may even fire more people because they are too expensive to employ. There will also be a decrease in new job creation, so this will lead to workers losing their jobs or even having a tougher time finding any job at all.
The increase in minimum wage will also lead to an increase of price in products and goods. This increase will lead to inflation because when people are being paid more (if they still maintain their job) they have more money to spend, so the price of the goods that they buy would go up as well. However, people who may have not been able to find a job or who may have been fired still have to pay these increased prices, even though they do not have that extra money coming in.
The people most affected by the wage change are teenagers who will receive a 4.67 percentage increase in teenage unemployment. According to Policy Analyst Ben Gitis in the American Action Forum’s analysis, “Not only is there evidence that total unemployment rates increase and job creation decreases, but there is also substantial evidence that teenagers suffer the most. With the national teenage unemployment rate persistently above 20 percent, increasing the minimum wage is the last thing the future of this country needs.”
Some people believe that increasing the minimum wage is the only solution to fixing the unemployment and poverty level because people will be paid more and therefore have more money to spend. However this can lead to people losing their jobs or being unable to find work because companies are no longer hiring. While other people believe that eliminating the minimum wage is the only solution because it will create jobs for the higher skillset of those looking for a job. However these employees can go for jobs that pay minimum wage, they just feel that they are overqualified and choose not to apply for those jobs.
In both situations, neither raising nor eliminating the minimum wage is the solution. Getting rid of minimum wage will not instantly create jobs and increasing minimum wage will end up losing jobs. The minimum wage should stay as it is instead of raising it or lowering it. Changing the minimum wage is not the answer to the broken economy, so we need to search for other solutions.