This creates a knock-on effect wherein this spending fuels hiring at other companies, whose workers also spend. In contrast, the additional profits earned by corporations as a result abolishing the minimum wage could be invested anywhere in the world and capital gains from stock price improvements are taxed at a relatively low rate. Without a minimum wage, there would be more Americans working, but they would not make enough money to survive. This could have a number of impacts. Many workers would exit the job market, choosing instead to rely on social assistance. Others would turn to criminal enterprise or find ways to work in the underground economy. If too many Americans earn insufficient amounts to survive, there could even be deflationary pressure as prices will need to come down to the level of these workers.
The government, when considering the issue of a minimum wage, must weigh the benefits to the economy as a whole vs. The direct revenue benefits to the government,...
The weight of economic evidence leans against the idea of the minimum wage. The minimum wage itself is a form of intervention in the markets, so from a purely economic perspective the minimum wage should be abolished. That is exists is a reflection of the intrusion of non-economic considerations, which are natural for a government that is attempting to balance a number of different objectives, not all of them purely economic in nature.
Works Cited:
Dimock, M. (2006). Maximum support for raising the minimum wage. Pew Center Research Publications. Retrieved September 20, 2011 from http://pewresearch.org/pubs/18/maximum-support-for-raising-the-minimum
Garfield, R. (1996). The case against a higher minimum wage. Joint Economic Committee Report. Retrieved September 20, 2011 from http://www.house.gov/jec/cost-gov/regs/minimum/against/against.htm
