How Does The Minimum Wage Affect The Economy

Minimum wages are the lowest hourly, daily or monthly wage that a government requires employers to pay to employees. The increase and decrease in minimum wages has impacting effects on multiple factors in our economy including the unemployment rates. Over the years, we can see a change in the effect. The more visible and instant results are known as the short run effects and the long lasting and less predictable results are known as the long run effects. Both of these effects are crucial to predict before taking any action. Usually, open-minded people tend to focus more on the long-term outcomes rather than the short-term outcomes. Although an increase in minimum wages increases productivity, the unemployment rate will inevitably drop if the minimum wages increase since companies have specific budget for their employees. In this same scenario, these companies will not be able to afford as many workers and they once could and therefore resulting in an increase of
Employers are unable to afford hiring unskilled and inexperienced workers therefore leaving teens unemployed. Assuming Costumer Price Index rises by 3 percent when the real minimum wage rises by 10 percent ($4.25-$5.15), teenage employment increases by 3.47 percent (306 thousand) in the long run (Hsing, 1997, p.329).Teenage Employment is a crucial to a country's economy since it does not allow the chance for future generations to enter society. It is widely important to leave them a chance to join the labor force. Their employment permits them to get a sense of responsibility, leadership, and independence. Moreover, High school dropouts significantly increase due to the new attractive wages. To recapitulate, teenagers will not only be at a disadvantage searching for jobs due to their low experience, but they also drop out of school to pursue the new wages, leaving them helpless the fend for