Raising Minimum Wage Raises Many Questions

Katie Smithson-Stewart-AM

Would raising the minimum wage in the United States really help workers as much as the public expects it to?  In my opinion, probably not.  Charles Wheelan mentions in Naked Economics that “a higher minimum wage obviously helps those whose wages are raised; at the same time, it hurts some low-wage workers who lose their jobs (or never get hired in the first place) because firms cut back on the number of workers they employ at the new higher wage.”[1]  While this information is undoubtedly very important to the conversation, it is not the only thing that people should consider when forming an opinion on minimum wage.

First, people need to consider how a raise in income for some people will affect prices for everyone.  For example, my two friends and I make the minimum wage of three dollars a day.  At the store, an apple costs two dollars.  Every day before going to work, we all buy one apple.  One day, one of my friend and I’s wage increases to four dollars a day, so we start buying two apples a day on our way to work.  We soon find out that when the minimum wage increased to four dollars a day, our other friend was laid off and now only receives two dollars a day in unemployment benefits.  My friend and I continue buying two apples a day for four dollars each per day until the seller, seeing how the demand for apples has increased, raises the price of a single apple to three dollars.  My friend and I can now only buy one apple a day, but we are not too upset since it was only recently that we started buying two.  However, the friend who was laid off is no longer able to buy any apples at all, and goes hungry.  After receiving a lot of profit, the seller makes enough money to hire my friend who was laid off.  My friend receives four dollars a day and buys one apple on the way to work every day like the rest of us.  Eventually, someone petitions for the minimum wage to be raised to six dollars, so we can all buy two apples every day again.  Our friend is laid off again, receives three dollars a day, and can no longer afford to pay for two apples.  The rest of us start buying two apples a day again, until the seller raises the price of an apple once more and puts us back where we started—buying one apple a day.

Of course, there are hundreds more factors that could affect this narrative, but the main thing to remember is that, no matter the factor, the free market is self-correcting. Changing one determinant cannot change the entire system.

[1] Wheelan, Charles.  Naked Economics: Undressing the Dismal Science.  New York: W.W. Norton & Company, 2010.

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