Minimum Wages

Essay by EssaySwap ContributorUniversity, Master's February 2008

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I'm not agree with th policy of "minimum wages" and I tried to undrestand wheather it is good or not by using simple tools of economics:supply and demand. If prices go up , buyers will buy less. Thus if labour becomes more expensive , employers will hire fewer workers. On the other hand the higher the price suppliers receive , the more they will supply. So , higher wages increase the number of workers willing to work but decrease the number of workers employers will hire. And this causes a surplus of labour which means "unemployment".

Another important point is that, the minimum wage policy hits workers with limited skills, and young people willing to work. For example , a poor kid whose education in an inner-city public school makes going to college unlikely, and whose best hope for gaining skills is job experience, is less likely to get a job because of the minimum wage policy.

Employees will prefer skilled employers rather than a young, unskilled boy. Of course employees has nothing to do at this point. For example if we assume a employee (in a market which there is no policy of minimum wages)that will charge $10 for a skilled worker, while each of the unskilled workers will be charged only $4. In this case the employee will hire the two unskilled workers because, in total, it costs him $8 for the unskilled workers whereas it would cost $10 for the skilled worker. But when there is a policy of minimum wages the employee will prefer the skilled worker since he will pay same wages for each. The result is unemployment of the unskilled workers. And in my opinion , the policy of "minimum wage" increases the poverty in a country because of the problem of...