Wednesday, May 1, 2013

Minimum Wage and Economic Welfare

Last year Representative Jesse Jackson Jr. proposed increasing the minimum wage here in the US because it will increase spending by low income individuals

President Barack Obama also proposed increasing the minimum wage in his 2013 State of the Union address.

Economic theory would say that this statement is both true and false.  It will be true for those that are employed at the minimum wage, since their wages are higher than previously; but economic theory also shows that fewer people will be employed in minimum wage jobs as firms have to pay higher wages.  Whether the overall effect is positive or negative depends on the elasticity of labor supply and demand for minimum wage jobs - which ends up more an empirical issue as opposed to a theoretical issue.

Here is a map by the Department of Labor with each states minimum wage (if applicable).

No comments: