What are the arguments for and against raising the minimum wage? Use graphical analysis to illustrate your reasoning.

The minimum wage rate is defined as the wage rate that is fixed by the government of the nation. The wages and the labor class are often exploited in the market. The government fixes a minimum wage that should be given to them to avoid exploitation of the workers and reduce income inequality in the marker.

The arguments in favor of raising the minimum wage rates;

• If the wage rates have raised the workers and labor class experience positive externality. It gets easy for them to combat the inflation rate in the economy.
• The spending of the labor class or the workers will increase which will increase the demand for goods and services. The increased demand eventually creates more job opportunities in the economy.
• With an increase in the minimum wage rate the trust of the worker increases on the employer and the company as with increased their faith and loyalty towards the employer increases.
• With an increase in the minimum wage rate the cash in hand of the worker increases, this helps them save more for future emergencies. This also reduces the crime rate in the economy.

The arguments against the increase in the minimum wage rate are as follows;

• If the minimum wage rate increases there will be an increase in the cost of production to the employer this may cause an increase in the prices of the goods and services as well.
• The employer may reduce or even stop the hiring process to combat the increased cost of labor.
• The employer will outsource the business activities to those countries where the labor is cheaply available this may create a negative externality for the domestic workers.

The above graph shows the wage rate in the economy on the vertical axis and the quantity of employment on the horizontal axis. D is the demand curve S is the supply curve of the workers. ER is the equilibrium wage rate. ER1 is the increase in the minimum wage rate. ER2 is the fall in the minimum wage rate. E is the point of equilibrium where the demand and supply of labor are equal at the equilibrium wage rate. As the minimum wage rate increases, there is an increase in the supply of labor in the market as more and more labor would want to reap increased wages. The supply gets increased and demand falls. On the other hand with a decrease in the minimum wage rate the supply is reduced as the labor is reluctant to work at reduced wages. There is a fall in the supply and rise in demand.

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