In most countries, minimum wage was originally associated with social protection, and was introduced as a means of fighting labor exploitation. However, several serious disadvantages of this standard were revealed after years of practice. Studies show that minimum wage affects the labor market negatively and raises unemployment.
American researcher and columnist Don Watkins emphasizes the critical influence of minimal wage on young people, who lack proper skills, experience and networking connections. Young people work for low remuneration at the beginning of their career, having a valuable opportunity to keep occupied with job and earn useful experience in the areas they have chosen. “If you forced companies to pay interns significantly higher wages, you would achieve only one result: you would prevent young people from realizing those benefits”. Subsequently, young people suffer from unemployment and poverty rates increase.
Another negative effect of minimum wage legislation can be observed on small businesses. Operating expenses are a heavy load for their budget. In these circumstances, employee remuneration is one of the few costs that the small business can control and adapt to their needs. With minimum wage establishment, small businesses are deprived of this right. Therefore, they must cut jobs or downsize. With the amount of 28 million small businesses existing in the US, this has an unfavorable effect on the overall economy.
Finally, minimum wage raises the price of goods and services produced by minimum-wage workers (Congressional Budget Office), because the producing company is interested in covering its expenses. This means that more people will no longer be able to purchase the goods or services that exceed the limits of their budget. Again, the overall economic effect of this process is negative.
As a conclusion, the above-mentioned disadvantages are strong arguments against the minimum wage establishment in the US. Other measures of social protection and struggling with income inequality should be considered.