Increasing minimum wage by the federal government
Increasing the minimum wage by the federal government will cause a reduction in staffing levels for some selected businesses. Increased minimum wage implies that the government expenditure is going to increase drastically. As a result, the government will want to reduce costs, and this will be possible by reducing the number of workers for selected companies. Following this action, some companies facing the effect of increased costs and with the inability to sell more of their goods or pass the burden to their customers, will be forced to hire very few low wage workers. Ideally, low-wage workers will lead to decreased costs but on the hand will lead to decrease productivity.
Furthermore, increase of minimum wage rate by the federal government will have an effect on the demand for jobs. With more money, the demand for jobs will increase thus causing constrain to the available jobs. For the selected companies, increase in minimum wage rate will lead to increased labour costs. In order to subdue this effect, such companies will opt to raise prices for their products and services. Ideally, this means that the burden will be shifted to the customers. Many customers will thus reduce their purchasing levels, implying that the companies will require few workers.
On the other hand, raising the minimum wage will make the hiring of low-wage workers a bit expensive. Although the government will enjoy collecting more revenues through taxing the increased income levels, there will be increased spending and the unemployment level will also increase. Therefore, it is true that the increase of minimum wage by the federal government will increase lead to the reduction of staff in the selected businesses.
