ECON 0858 Issue Paper #1 2/27/18 Student Name (1) Position Statement Topic: Minimum Wage Laws (2) Minimum wage laws have been debated as a chief topic among legislators and economists alike, especially recently with Bernie Sander’s proclamation that it should be set to $15/hour. A higher minimum wage can stifle the growth of small businesses, and affect millions by increasing unemployment for unskilled workers, while a lower minimum wage may contribute to increased poverty or a poor standard of living for some. Under President Trump’s new tax plan, decreased income tax rates for consumers allows them to spend more money, which in turn will help small businesses, who also reap the benefits of a reduced corporate tax and capital gains tax. Because these changes may spur a growth in economic activity going forward, the current federal minimum wage of $7.25/hour should not be increased nor decreased in order to properly assess the effects of Trump’s plan. Moreover, all 50 states should adhere to the minimum wage in order to properly assess its economic impact on the U.S. as a whole. (3) Economic Arguments Against My Position: a. An increased minimum wage allows unskilled workers to contribute more to the economy. i. If workers earning the current minimum wage can take home more money, they are inclined to spend that money and contribute to small businesses and help boost economic activity. ii. Since 2012, the Fight for $15 movement helped low-wage workers gain $61.5 billion in annual raises through state and local minimum wage increases (National Employment, 2016). b. An elimination of the minimum wage will spur economic growth and create new jobs. i. A minimum wage must be set above the equilibrium price of labor in order to take effect, and its effects are seen through the U.S.’s unemployment rates. ii. In 2015, unemployment averaged 5.26%, implying that those who were unemployed could have been employed in unskilled jobs if firms could afford to hire them (Bureau, 2016). 1. Lost gains from labor trade create a need for the unemployed to enroll in government welfare programs, with 6.2 million Americans receiving $32 billion in unemployment compensation in 2016 (United States, 2018). 2. Low-wage workers receive retarded wage growth when there is a small increase in the minimum wage, compared to if there was no increase (Lopresti, 2015). iii. Companies that outsource production will bring manufacturing back to the U.S., creating jobs and utilizing land more efficiently. 1. Foreign-owned firms in Mexico and Venezuela pay workers more than their domestically-owned counterparts, which suggests that those firms (including those owned by U.S. entrepreneurs) that outsource pay foreign workers below the U.S. minimum wage but above the domestic minimum wage, if there is one (Aitken, 1995). 2. If there was no minimum wage, American companies would be incentivized.