Minimum Wage To Poverty Rate Increase
One of the effect of imposing minimum wage to the economic is poverty rate increase. Most of the people will think that if a firm pay their low wage employees more, so the workers will earn more and will not live in poverty. That is an incorrect statement. When government raise the minimum wage, the firms will incur more expenses due to they have to pay more on the wages. Therefore, the firms will have 2 options. First, they hire less worker and use machine to replace the workers. With this option, the firms can reduce variable cost and machine can bring a benefit to the firm which is machine can work 24 hours without rest. In other word, raising the minimum wage will reduce the job opportunity. Another option will be the firms raise the price