by Luc Turner

Created on: October 22, 2010   Last Updated: October 27, 2010

People are certain that the minimum wage affects unemployment, but there is a bit of debate regarding how.  In this article, I will cover how minimum wage can fuel unemployment, and this tends to happen through drastic increases in the minimum wage. This type of dramatic increase has recently happened, so the topic is relevant to our world today. Before we address the topic of minimum wage and its effects on unemployment rates, there are some essential foundation issues that we need to cover. Keep in mind that it is intuitive from the ground level that people making more money grows the economy. Unfortunately, the economy is far more complicated than this.

-   What is the minimum wage?

The minimum wage is the highest dollar amount established for where you work that employers are required to pay you for basic services rendered. Everyone knows about the federal minimum wage, but there also exist individual state and municipality minimum wages. If you want to know what the minimum wage is for where you live, visit the Department of Labor website http://www.dol.gov/whd/minwage/america.htm.

- What is the minimum wage “designed” to do?

The minimum wage establishes a “floor” for society. This is the base level of prosperity that the government demands a business provide for work done. The idea behind this is that businesses will set wage standards below a fair rate if left to their own devices, and this is detrimental to the economic prosperity of the country as a whole. In other words, greedy businesses won’t come off a dime unless the government acts as a knight in shinning armor and saves us from the evil beast known as the “business.”  The truth is that around 100 years ago this idea was needed in America, and the idea of the “evil company” had certain companies living up to that mythos.

- Who does the minimum wage affect?

The minimum wage affects every individual that engages in working for a company that provides basic goods or services, and every person that purchases these goods. Think food and clothing here and you will get the idea. When you work for one of these companies and you are one of the people making minimum wage, an increase in the minimum wage increases your paycheck. If you purchase these goods, your luck is different. Profit margins for the company are endangered, and this triggers changes in the company. This could mean you pay more for what you buy, get less for what

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