Effects of Minium Wage on Business

Sharese Pulliam
Economics 102-003
Prof. Sayour
April 16, 2015
The Effects of Minimum Wage
The main focuses of this article is the effects minimum wage has on all aspects of the economy in a microeconomics perspective. The minimum wage has a number of positive and negative effects on businesses, families and individual workers, from a microeconomics perspective. Businesses that employ unskilled labor see their profit margins diminish and their expenses increase, presenting a challenge to their economic growth and introducing a new variable to economic decision-making. Many companies see the minimum wage as a large expense for an unskilled worker, which can cause them to impose stricter decision criteria for hiring or cut back on hiring altogether.
Minimum wage has seriously bad effects on a business. The vast majority of economists believe the minimum wage law costs the economy thousands of jobs. The most fundamental principle of economics is “supply and demand”. In the case of labor, this means that the supply of workers goes up as wage goes up, and the demand for workers by employers goes down as the wage goes up. For example, imagine a janitorial job was advertised for hire. If the wage is $100 per hour, thousands of people would want the job. If the wage was $1 per hour, you probably wouldn’t find anyone to do it. Conversely, if the government forced the employer to pay at least $7 per hour, the employer might decide not to hire a janitor at all, instead opting to have other staff pick up the duties. Therefore, a job would be lost because of the minimum wage. Setting a mandated wage limit disrupts market forces of supply and demand. Just because there is no minimum wage doesn’t mean companies can pay whatever they want. Would you work a dishwashing job that paid 25 cents per hour? Would anyone? If they raised the wage to $4 per hour, they might be able to hire a high school student. Market factors of supply and demand determine how many jobs…