Did Minimum wage affect on government economics?

 http://articles.cnn.com/1999-11-08/politics/minimum.wage_1_minimum-wage-minimumwage-lowwage-workers?_s=PM:ALLPOLITICS 

This article is related to how minimum wage affected on governments economic as well as the advantages and disadvantages on workers. An important example of price floor is the minimum wage. A minimum wage law states that the lowest price for labor that any employer may pay. Everyone has to get jobs from labor market, so the wages we earn or the types of job we want are influenced by the market.

So who exactly will benefit from an increase on minimum wages? Well, it will help those vulnerable workers and prevent employee turnaround and put more money in the pockets of people who spend all of their income on the cost of living. However, in today’s very high demanded market, an increase on minimum wage would help those people who wash cars, wash dishes. However, some employees are not willing to pay more money on that level of work ability.

A minimum wage brings unemployment. When the minimum wage is above equilibrium wage, the quantity of labor supplied exceeds the quantity of labor demanded, this result a surplus of labor. (a) shows a free labor market, (b) shows a labor market with a binding minimum wage.

This graph explains that, at the equilibrium wage, the quantity demanded of labor equals labor supplied. In a market, when the wage rate is at the equilibrium level, the quantity of labor supplied equals the quantity of labor demanded. This will result a neither a shortage of labor nor a surplus of labor.

This graph illustrates the effect of minimum wage above equilibrium wage cause an unemployment. The horizontal red line shows the minimum wages set at $7 an hour. A wage rate below this level is illegal which the region that is coloured gray is. At the minimum wage rate, 20 million hours of labor are demanded and 22 million hours of labor supplied, so 2 million hours of available labor are unemployed.  With only 20 million hours demanded, someone is willing to supply that 20 millionth hour for $5. Frustrated unemployed workers spend time and other resources searching for hard-to find jobs. This is related to search activity. Search activity is costly. Workers have to use their time, resources, and phones in order to search the information for jobs. However, they could have used that period of time to do other things which perhaps will benefit them more. The opportunity cost is occurred.

This graph has shown the inefficiency of a minimum wage. The minimum wage $7 per hour is above the equilibrium wage which is $6 per hour and the quantity of labor demanded and employed which is 20 million hours is less than the efficient quantity 21 million hours. Because the quantity of labor employed is less than the efficient quantity, their result a deadweight loss, which showed by purple coloured region. The firms’ surplus shrinks to the top blue region colour and worker’s surplus is shown by the bottom blue region. The pink region showed the potential loss from increased job research, which is borne by the workers.

Is the Minimum Wage Fair? I basically think is unfair. The reason is because only those people who have the jobs and keep them benefit from the minimum wage. The unemployed end up worse off than they would be with no minimum wage. For those people who search for jobs and they ended up worse off, because the increased cost of job search they incur.

The minimum wage has the greatest impact on market for teenage labor. The equilibrium wages for teenage are low. This is due to teenagers with lack of working experience as well as limited skills. Moreover, teenager will accept a lower wage. Many teenagers have never worked before, most likely is first time for them to try work in a particular place. No matter how much the employees offer, they will accept, because is the first salary they have earned. Or some of the teenagers work part-time jobs, just want to get some extra spending money.  As a result, minimum wage is more often binding for teenagers than for other members of the labor force. In additional to altering the quantity of labor demanded, the minimum wage alters the quantity supplied as well. Because the minimum wage raises the wage that teenagers can earn, it increases the number of teenagers to who choose to look for jobs. For example in U.S.A, when the minimum wage raises, teenagers are still studying in school, and some of them will choose to drop off from school and take the jobs. These new dropouts displace other teenagers who had already dropped out of school and they will become unemployed.

Even though an increase on minimum wage has big impact on market, there are still some good reasons about it. For instance, those with highly skilled and experienced workers are not affected because their equilibrium wages are well above the minimum. It is good for family, with more family income, some people might choose to retire early, or continue education, travel around the world, and so on. Therefore this will offer more opportunities for other people who needs job. Furthermore, it helps ensure employees are rewarded for their hard work and boosts the income of low-wage workers. For example, if you increase just little amount on their wage for low wage workers, they will be very happy and satisfy. This also built up more confident on them, therefore they will perform better. Increase on minimum wage is also a good way to motivate workers.

In conclusion, an increase on minimum wage has positive impact as well as negative impact. It all depends on markets and labors force. For low-waged workers should get more educated in order to have better paid. However, the government should pay more attentions to these lower income citizens, should have made more policies in order to protect their benefits.