Minimum Wage: What Do the Economists Say?
In economics, the minimum wage is a very tricky question. Indeed, it's one of the biggest questions right now where many economists vehemently disagree. And with its enormous political and social implications, this is a question that needs to be answered more than ever. At face value, the effects of a minimum wage are simple. Any introductory Micro class will teach that price floors---in this case, a minimum wage that restricts wages to above a certain price point---will simply lower the quantity demanded of labor and create unemployment for unskilled workers, hurting the very people the minimum wage is intended to help. In other words, let's say unskilled labor is only worth, for example, 10$/hour, but the government raises minimum wages to 20$. Then, businesses will start realizing, “We're already paying 20$, so what’s the point in keeping the unskilled labor? Let’s fire them all and bring in skilled ones, people actually worth the 20$”. This drives unemployment among th...