How changes in the minimum wage can impact employment

Title: Minimum Wage and its Impact on Society

The topic of minimum wages has become a very contentious and captivating issue throughout the developed world. For one, accommodative monetary and fiscal policy, as a result of COVID-19, has flooded the market with large amounts of currency, thereby depreciating the value of dollar. In addition, rapid inflation, caused by a litany of economic sources, has lowed the purchasing power of the dollar relative to other currencies around the world. Many businesses have responded by raising prices on numerous goods and services, including consumer staples, toothpaste, food, utilities, and clothing. The impact of these price increases has been far reaching as industries from retail to automobile manufacturers have been forced to raise their respective prices. Unfortunately, wages, have remained relatively stagnant over many decades, even as the cost-of-living has increased. Here, consumers are now forced to contend with higher prices, lower purchasing power of their dollar and lower prospects of wage increases (Stigler, 2006).

To combat this trend, the government has proposed a series of minimum wages increases, designed to help mitigate the impact of the economic forces mentioned above. Overall, the impact of minimum wage increases is unknown, but many theories persist. Once likely effect will be a reduction in employment of teenagers or those with no marketable employment skills (MaCurdy, 2015). As minimum wage increases, employers will demand a higher return on investment to justify the wage expense. This in turn could exclude teenagers and very young workers from entering the workforce as mores experienced professionals compete for higher paying jobs (Neumark, 2004). In addition, there is a theory that the minimum wage increase will exacerbate a shift towards automation and robotics. Here, fast food chains are already experimenting with robotics that can automate the cooking and distribution of food products. Likewise, company’s such as Alibaba and Amazon are also experimenting with artificial intelligence and robotics within their warehouses and distribution networks. Here, if the price of unskilled labor rises too high, companies, to maintain their margins, will look to leverage alternative means of production (Brown, 1982). This ultimately can result in the unintended consequences of lowering low skilled employment in favor of automation and robots leveraging artificial intelligence. This in turn would exacerbate the overall employment and wealth inequality issue that the policy was originally intended to fix.