EVALUATING MINIMUM WAGE AS A LEGAL PRICE Research Paper - 1

EVALUATING MINIMUM WAGE AS A LEGAL PRICE - Research Paper Example This could sometimes result to negative economic impacts. This paper discusses the issue of evaluating minimum wage as a legal price. In the paper, we present the arguments behind this issue as well as some of its assessments. Increase in unemployment is a factor of minimum wage as a legal price. The rate of increase in unemployment depends with whether the minimum wage set is for skilled laborers or unskilled laborers. According to OECD (2011), job opportunities in the labor market for young people and unskilled workers are reduced by increase in minimum wages. However, the impact is different for the case of skilled workers. Evaluating minimum wages as a legal price could enhance understanding of its affect in both the case of skilled labor and the case of unskilled labor. This assists in making the right decisions on when to increase the wage and how to increase it. Increasing minimum wages could hinder economic development. By resulting to increase in the rate of unemployment, high minimum wage would lower economic development since unemployed people will be having little or no contributions to the economy. However, according to Mankiw (2011), advocates of minimum wage show that it results to increase in the earnings of poor workers. This could lower poverty levels in a country thus resulting to an economic development. Therefore, evaluating minimum wage as a legal price is necessary to determine the positive effects of increasing it as well as its negative effects. A raise in minimum wage as a legal price result to an improved standard of living. Increase in minimum wage increase the amount earned by a worker for doing the same job. However, this can only happen with low-earning jobs since the employee lives within the maximum he can earn. For highly paying job, it can have little or no effect. Moreover, Folsom & Boulware (2009) shows that increasing minimum wage cannot improve the standards of living since the people working at minimum wage are not the