Minimum Wage Increase May Not Cause Inefficiency
CNN (http://www.cnn.com/2007/POLITICS/02/16/minimum.wage.ap/index.html) and other news sources have reported on the House and Senate passing a bill that would increase the minimum wage from $5.15 to $7.25 over the next two years. Minimum wage is clearly a price floor, which can cause an inefficiency in the market if it is set above the free-market equilibrium. I do not think the minimum wage increase will affect the market equilibrium. Most people in the lowest income bracket are already being paid above minimum wage. Even companies in Cedar City -- like Smead, Convergys, etc -- who primarily hire unskilled individuals without a college education, are paying above minimum wage. Also, many states have higher minimum wages -- also called living wages. I don't think the increase to $7.25 exceeds the free-market equilibrium and should not cause excess supply of labor. I think that the only companies that may see an excess supply of labor and a higher labor cost is fast-food restaurants, which primarily hire high school students at the minimum wage.