The Effects of the Minimum Wage on Overall Unemployment

There has been a lot of discussion concerning the positive correlation between the minimum wage and unemployment rates. Economists debate on the nature of these two notions and create contradicting arguments. The purpose of this paper is to analyze the impact of the minimum wage on unemployment rates in general and those of the state of Massachusetts in particular based on both sides of the argument.

As of January 1, 2020, the Massachusetts minimum wage increased to $12.75 per hour, with the service rate being $4.95 per hour. This increase is a part of a new law that is intended to establish the minimum wage rate up to $15 by 2023 in Massachusetts (Minimum wage program, 2020). According to some economists, higher minimum wages can actually raise the unemployment rates despite the good news. It implies that the companies would want to hire fewer employees for their business to stay cost-effective. It would be more profitable to automate the tasks that were performed by lower-waged workers.

However, such an approach may not be rational if applied in practice. Indeed, not every business or organization can access the technology necessary for the automized operating at a reasonable cost, which will make quitting the employment of actual workers impossible. It especially applies to small employers who have limited funds. Moreover, the increased minimum wage would create more jobs for low-wage workers, as this rise would stimulate the goods and services demand of such workers who would now be able to afford more. Thus, productions will need to hire more employees to keep pace with the increased demand.

To conclude, the theory of the positive correlation between increased minimum wages and unemployment rates does not seem logical. On the contrary, it will broaden the economy by creating new job opportunities due to the higher demand for goods supply. Moreover, there are obvious benefits of providing the existing employees with higher salaries and improved quality of life. Thus, the increase in Massachusetts’ minimum wage rate will most probably give positive outcomes for the state’s working population.

Reference List

Minimum wage program (2020) Web.

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