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Minimum Wage Effect

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In the current United States of America, a high minimum wage has hurt people economically, which has been seen by poverty rates, unemployment rates, and the reduction of part-time jobs. In 2008, an economist from American University and Cornell University released their results to their study on the effects of a higher minimum wage. They reported that through 2003 to 2007, the increase in the minimum wage did not decrease poverty rates throughout the struggling urban areas of America. Simultaneously, a group of economist from Ohio State University released a study that the increase in minimum wage, but in fact increased poverty rates across America. Unlike poverty rates, there has been a significant and visible increase in unemployment rates …show more content…
This past March, a group of economist at Forbes made it “certain that a $15 minimum will devastate the California economy” (Adams). In addition, Michael Reich, an economist at U.C. Berkeley concluded his minimum wage study, stating that there would be “modest job loss and economic slowdown” for the city of Los Angeles. In conclusion to both studies, both economists concluded that business owners will have to miraculously increase revenues, or cut expense if the minimum wage would increase (Adams). One instance, for example, is when left-wing liberal and business owner, Rick Karp, was forced to reduce salary expense by 10% in order to compensate for the $3 increase in minimum wage. He chose to decrease salaries of full-time, skilled workers, instead of laying off the clerks and janitors at his hardware store in San Francisco (Adams). However, economists have offered an alternative solution that does not require you to find new sources of revenues, or cut expenses. The solution is to charge more for products and services, which increases your revenue to eliminate the new expense fees created by the increase in minimum wage (Wihbey). An example of this alternate solution is the McDonald's scenario, which exhibits the solution in simple terms. If McDonald's has to pay their kitchen worker $5 to flip hamburgers, they will charge $2. However, with a new minimum wage where …show more content…
For example, this past April the state of California passed a new law, that will raise the minimum wage to $15 by 2022, which is already causing businesses to leave the state (Wolf). In one instance, commercial airplane part manufacturer, California Composites, disclosed its’ decision to leave California to avoid the higher minimum wage (Bergman). President of California Composites, Fred Donnelly, stated that he is moving the company to Texas because of the “dysfunctional and excessive state and local regulations, as well as the forthcoming $15 minimum wage”, in an interview with the local Pasadena radio station, KPCC. In comparison to other situations, domestic moves such as California Composite is not considered as a bad outcome because of the amount of international moves from the United States to foreign countries (Wolf). While many left-wing economists blame this on many other reasons, nonpartisan economists from the Harvard Business Review (HBR) source manufacturing businesses who are going offshore is directly caused by higher wages. In their September 1988 report, these economists reported that AT&T, United Technologies, and General Motors, relocation of their production centers to Singapore, Europe, and Mexico respectively, were forced to move in order to stay

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