Jimmu

POLICY PAPER 1

To:

From:

Date: October 23, 2005

Subject: Minimum Wage

In response to your question:

Would an increase in the minimum wage be good for the US economy?

The purpose of this paper is to determine if an increase in the minimum wage be good for the US economy. There are two sides to the debate about minimum wage that both hold valid points. The minimum wage is a major issue in the world of economics and politics. Political figures often prey on the public’s general ignorance of economics and promise to increase the minimum wage. Economists ,on the other hand, view the long term effects and see the damage it can cause. “An increase now will boost income for the poorest workers without the danger of creating more unemployment.”, states the New York Times in September 1999. However, is this statement about an increase in minimum wage really true?

The conclusion is, positive effects of the minimum wage can be the obvious; more money for people. They would have more money to spend , the economy would boom and everyone would be happy. Not so; in fact, this would only encourage inflation and increase prices. Money become lesser in value and producers would have no choice but to raise prices in order to make profit. Another negative aspect of raising the minimum wage is unemployment rising. Supply of workers would exceed