Minimum Wage: Why Minimum Wage Should not be Increased

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INTRODUCTION

The subject of minimum wages and their effect on unemployment levels is a controversial issue. A study that raised many questions for economist on weather increasing the minimum actually help the poor, which was the whole point in raining the minimum wage, was the study done in 1992 by David Card and Alan B.Kruege. The majority of Americans, however, favor increases in the minimum wage. They look at these increases as a way to help the poor, and see it as a beneficial thing to do. Politicians exploit these feelings by raising the minimum wage to gain popularity. However, these raises in the minimum wage often hurt the very people that need the help. With this in mind, we are going to explain the effects of raising the minimum wage and considers alternatives.


DEFINITIONS


Unemployed - a person is considered unemployed if he/she is above the age of 16, does not hold a job and has actively looked for employment in the last 4 weeks. If a person does not have a job and is not looking, he/she is not considered unemployed. Therefore, if a person needs a job, but has stopped looking because they are discouraged by the job market, they are not considered unemployed. Long Term Unemployment - unemployed for more than 26 consecutive weeks.


Employed - a person who holds any job, full or part time is considered employed. Labor force - the sum of all employed and unemployed individuals.


Unemployment rate - the percentage of the total number of people in the labor force who are unemployed. It is calculated as: unemployement rate = unemployement/ (unemployment = employment).


Underemployment- the number of people who work during a recession but receive lower wages than they would during an expansion due to fewer number of hours worked, lower-paying jobs, or both.


Employment to population ratio - the number of workers relative to the entire population. The Bureau of Labor Statistics breaks this ratio down into groups of like individuals (ex., teenagers), so employment levels among various groups can be observed.