The Minimum Wage Level and Business

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Updated: Mar 28, 2022
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Increase in minimum wage has both its positive and negative sides. If the minimum wage is raised then there is chances that firms and companies will reduce hiring new employee and also may reduce present number of employee. Recently, the Amazon raised its minimum wages to $15 which was good news for all the employees but there is chances that the number of employee may be cut out according to sources. Some companies are moving towards automatic machines to replace human employee as there is fear of high wages.

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But raising minimum wages has more advantages to the economy and society as whole. One can literally see the cost inflation and stuffs are getting expensive which results into people being unable to bear expanses. Students are unable to attain colleges and universities because the tuition fees are getting expensive while their wages are still low.

What will be the impact on the prices of the products produced by workers working at or near the minimum wage level, and how will this affect overall consumer purchasing? 25 points

Many companies pay minimum wage to their workers to have benefits in profit and market occupancy. The prices of the products produced by workers working at or near the minimum wage level will increase as the variable cost (cost of producing the goods) will increase and to have profit as early or to maintain more profit, firms and companies increase the price on goods which will be burden to consumers. When the price for goods are high then the consumer purchasing will decrease as people hate high prices and as the result, the quantity demanded will fall as people won’t be able to pay high prices than normal price as earlier. Whenever the prices go high the burden is on consumers who bear all the extra costs. The consumer purchasing capacity decreases as the outcome.

Discuss any potential changes in the incentives for low-skilled workers to increase their human capital, and for employers to substitute capital inputs (technology and automation) for labor. 10 points

As minimum wage rises, there would be frequent layoffs for low-skilled workers and they would remain unemployed as firms and companies will cut out the number as to keep their profit stable. This activity will force the workers to be incentivized to increase and uplift their skills and ability which will help them to get better paying jobs and to avoid layoffs. Employers too will be incentivized to invest more on capital and less on labor as investing on capital like technology and automation turns to be cheap and reliable. Thus, firms and companies will turn to machines and start being automation.

What might be the impact on government spending on entitlements such as welfare, food stamps, and unemployment compensation in light of the fact that changes in the minimum wage can create changes in unemployment and underemployment? 25 points

Based on your responses, do you believe that the minimum wage should be raised, lowered, remain as it currently is, or be altogether eliminated? Explain your answer, and make sure to address any social responsibility the government should have regarding the well-being of its citizens with respect to the setting of wages in the private sector. 15 points

When the minimum wage is increased, the government spending on entitlements such as welfare, food stamps, and unemployment too will increase as more people will be turned out from jobs and unemployment rises rapidly. As the result more people will turn to be under poverty level and government will be forced to increase the spending on various entitlements.

From above answers, increasing the minimum wage has more disadvantages than benefits as it creates more unemployment and reduces consumer consumption. Also, it forces government to increase their budget for entitlements to support poor people. But setting minimum wage has its own benefits for workers as some firms and companies doesn’t pay them and currently this minimum wage policy help workers to get their earnings and prevent them from exploitation. Complete elimination of minimum wage also can’t be enforced as this will result more people to be heavily dependent on government for employment guarantee and government will be forced to invest lot for public welfare. So, raising, lowering, remaining constant or altogether eliminating the minimum wage need to consider with great care as this step will turn the whole economy up and down. The government with the help of professionals all should sit together and figure out suitable solution for this minimum wage crisis.

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The Minimum Wage Level and Business. (2020, Mar 20). Retrieved from