why is increasing the minimum wage good?
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Even modest rises in the national minimum wage make a big difference to disposable income and contributed to higher spending. Higher wages enable higher consumer spending and a rise in AD.
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Any Econ 101 student can tell you the answer: The higher wage reduces the quantity of labor demanded, and hence leads to unemployment. This is one reason why 72 percent of US-based economists oppose a federal minimum wage of $15.00 per hour.
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Firstly, a minimum wage may not cause any unemployment. Labour markets are not perfectly competitive but have a degree of monopsony power. Demand for labour may be wage inelastic. Firms just pay higher wages and there is little fall in demand.
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If the people earning the minimum wage are heads of low-income households, higher minimum wages are likely to reduce poverty. If low-income workers lose jobs and cannot find jobs because of a higher minimum wage, social safety nets for low-income households can protect against increased poverty.
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Raising the minimum wage will have positive economic effects above and beyond lowering the poverty rate. Economic research points to the conclusion that a higher minimum wage does not cause greater unemployment, boosts productivity, and addresses the growing problem of rising income inequality.
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To put this into perspec- tive, a 1% increase in minimum wage translates into a 2.6% decrease in rental default. This evidence is consistent with wage increases having an immediate impact on relaxing renter budget constraints.
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The adult minimum wage will increase $1.20 from $17.70 to $18.90 per hour on 1 April 2020. The new rate equates to an extra $48 per week before tax for employees on a 40-hour working week.
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Recent studies have found few job losses from minimum wage increases. Our economy is also being held back by slow labour force growth, including from fewer people working or looking for work. Higher minimum wages are likely to draw more people back into the workforce, which will boost our economy over the long term.
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While the federal minimum wage remains at $7.25 per hour, some states have opted to increase it to more than $10. Minimum wage workers in 18 states will get a pay hike next week when higher wage floors go into effect around the country for 2018.
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New: As part of a long-established plan, minimum wage rates in Ontario will increase on October 1, 2020. ... The increase to the general minimum wage will be 25 cents, which will bring the new rate to $14.25 an hour.
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Also, if higher minimum wages leads to an increase in consumer spending, it could cause a degree of demand-pull inflation as well. In theory, a higher minimum wage could cause inflation for two reasons: Higher spending by workers (demand pull inflation) Higher costs for firms, leading to wage-push inflation.
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Ontario's legislature passed a bill on Wednesday that included the increase as part of an overhaul of labour laws. The minimum wage will be raised in two steps, from C$11.40 to C$14 next January and then to C$15 a year later. After 2019, the minimum wage will be tied to inflation.
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The minimum wage increases the wages of the lowest paid. These workers will have increased income and will reduce relative poverty. Increases the incentives to accept a job. ... A minimum wage could also increase the participation rate as the benefits of work become greater and more worthwhile.
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In theory, raising the minimum wage forces business owners to raise the prices of their goods or services, thereby spurring inflation. ... A higher minimum wage can be offset by heightened productivity by workers or trimming down a company's manpower.
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But many recent state and city-level minimum wage increases have been scheduled to be implemented over time and often are indexed to some measure of price inflation. ... They also observe that small minimum wage increases do not lead to higher prices and may actually reduce prices.
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['Minimum wages reduce employment. ... ', 'Minimum wage hikes reduce the earnings of low-paid workers. ... ', 'Minimum wage hikes make some low paid workers better off at the expense of others. ... ', 'Minimum wage hikes make young workers less skilled, lowering their future earnings.']
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The ripple effects from raising the minimum wage were effectively benefitting the middle class. Increasing the minimum wage, then, will create a new floor, and wage increases will ripple through the wage distribution. ... Increasing the minimum wage would go far toward reversing that trend.