Despite his remark after the Florida primary, Romney actually seems to be looking out for low-income Americans. The Republican presidential candidate supports automatic increases in federal minimum wage to keep pace with inflation. Although Congress has not raised the minimum wage since 2007, several states have taken the initiative to raise their individual minimum wages. Many argue that raising the minimum wage would make the cost of labour too expensive and force employers to hire less workers, increasing the unemployment rate. However, some believe shifting money from profits to wages will increase both consumption and the circulation of money. Could linking minimum wage to inflation adjust minimum wage better than the market? How would this affect small businesses and the income gap?
http://www.ft.com/intl/cms/s/0/8dfba482-5346-11e1-aafd-00144feabdc0.html#axzz1mCH8RN7l
5 comments:
I think that it depends on high they are going to raise the minimum wage. If they are going to raise it significantly from the current, I think it will decrease how many employees companies will hire especially small businesses. I think it will be really difficult for small businesses to hire people if the minimum wage increases significantly, they are more likely to have their current employees work longer hours. Since these employees will have a higher wage, I think we can expect more consumption but since companies will hire less people or let go people, their consumption will decrease.
Sure it always sounds good that the minimum wage is increasing because that means more money for us! However there are always those little reprocussions that our economy suffers in return.
Another factor of raising minimum wage is that it will encourage people that were not willing to work for the lower minimum wage (and therefore were out of the labor force) into the labor force which could possibly increase unemployment. And also as stated previously it could make companies less likely to hire more workers or reduce hours.
Its also important to think about the role of capital in this decision will it push business to seek to use lets labor at a means of production. As capital markets are able to provide cheap capital there can be a strong argument made that there will be even more pressure placed on companies to find ways to automate there means of production.
At the end of the day, a minimum wage is a price floor, and price floors are inefficient. Raising it will only leave more low-skilled workers behind. The workers who are currently struggling to find a job, any job will be in a much worse position is the minimum wage is raised. Their labor is already not valuable enough to be purchased in the market. Raising the price of that labor would only hurt them, and shrink the job market at the bottom.
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