Question

2. Increasing the minimum wage has not traditionally caused massive unemployment though traditional economists have argued that it should. Why have changes to minimum wage not affected unemployment too much?

3. The US has one of the lowest federal minimum wages compared to other developed nations. Can you think of reasons why this might be?
4. The real minimum wage has fallen over time with the rise of inflation. This represents less purchasing power for minimum wage workers. Are you ok with that? Why or why not? How many people actually earn at or near minimum wage?

Answer 1

2. Increasing the minimum wage has not traditionally caused massive unemployment because the relationship between minimum wage and unemployment is not as straightforward as some traditional economists believe. While an increase in minimum wage may lead some employers to reduce their workforce, others may choose to increase prices or find other ways to offset the increase in labor costs. Additionally, minimum wage workers may have more money to spend, which can stimulate the economy and create new jobs.

3. One reason why the US has one of the lowest federal minimum wages compared to other developed nations is because of the country's historical emphasis on individualism and free-market capitalism. Many Americans believe that the government should not interfere too much in the economy and that wages should be determined by market forces rather than government regulations. Additionally, some argue that a higher minimum wage would lead to higher prices and inflation, which could hurt the economy as a whole.

4. it could be argued that a falling real minimum wage represents a failure of the system to provide for the basic needs of its citizens. Minimum wage workers may struggle to make ends meet, which can lead to a host of social and economic problems. In terms of the number of people who earn at or near minimum wage, this varies by location and industry, but it is estimated that around 2.3% of US workers earn the federal minimum wage or less.

Answer 2

Despite traditional economic theory suggesting that an increase in the minimum wage should lead to unemployment, the actual impact on employment has been more nuanced. Empirical evidence suggests that moderate increases in the minimum wage have not led to massive job losses, but rather have resulted in small increases in labor costs that are offset by increased productivity and reduced employee turnover. Additionally, higher wages can increase consumer spending, leading to an increase in demand for goods and services, which can ultimately create more jobs.

There are several reasons why the federal minimum wage in the US is lower than in other developed countries. One reason is the political climate in the US, where there is often resistance to government intervention in the labor market. Additionally, many US states have their own minimum wage laws, which can be higher than the federal minimum wage. Finally, the US has a large low-skilled immigrant workforce, which can put downward pressure on wages.

I am not okay with the real minimum wage falling over time with the rise of inflation. Inflation erodes the purchasing power of workers, making it difficult for them to make ends meet. This can lead to increased financial hardship, which can have negative effects on individuals and families. Furthermore, the minimum wage was originally designed to ensure that workers earn a living wage, which is a basic necessity for a decent standard of living. As such, it is important that the minimum wage keep pace with inflation.

According to the Bureau of Labor Statistics, in 2021, about 1.9 million workers in the US earned at or below the federal minimum wage of $7.25 per hour. However, many more workers earn slightly above the minimum wage, and an increase in the minimum wage could potentially raise wages for those workers as well. Additionally, many states have higher minimum wage rates than the federal minimum wage, which means that the number of workers affected by changes to the minimum wage will vary depending on the state.

~~~Harsha~~~