Question

Response Required – minimum wage

Can you predict which group will be most harmed by a raise in the minimum wage? Why?

What about those that the employer lays off?

Answer 1

Minimum wages are a way in which governments set lower ceilings on the amount of money which will be mandatorily paid to people that are part of the work force for any company.

This helps in ensuring that people can live better and comfortable lives and are able to avail basic necessities of life at the same time.

However, many have criticized raising the minimum wages too much. The major reason for this is that the most vulnerable section of people is those which are currently unemployed or are low skill workers.

Companies hire low skilled employees primarily because these do not add up to costs. Once this changes they would soon be replaced by technology.

For example, In the United States, capital intensive techniques have replaced traditional employment.

If minimum wages are thus increased beyond a point, people who are non-skilled part of the workforce would find it increasingly difficult to find an employment opportunity for themselves.

Furthermore, those people which the employers lay off will find it even harder to get a job. This is because capital intensive techniques would replace them rendering their services useless for a firm.