Minimum Wage War

Minimum Wage war has again heated up as President Obama in a State of the Union address reveals that a rise in minimum wage to $10.10 will be coming through on an executive order. Obama is seeking congress to pass the $10.10 minimum wage but is unlikely that they will as republicans and democrats differ greatly on this issue (Coy). Will Republicans pass the minimum wage or will they block it? With the Great Recession recovery limping along inequality appears to be generating wide spread attention with the focus of growing poverty’s effects on millions of Americans. As the bottom rung of society grows to a crowded 3.8 million many Americans find a 12 percent loss of value since its 2007 hike to $7.25.

“As a matter of public policy, the solution is obvious. There are few government interventions that can match the elegance of a higher minimum wage. It boosts the fortunes of the working poor and the economy at large, with minimal trade- offs. Raising the minimum wage does little or nothing to dampen job growth. The Congressional Budget Office estimates that an increase to $10.10 would trim payrolls by less than one-third of one percent, even as it lifts nearly 1 million Americans out of poverty” (Dickinson).

What drives the determination of wages as we look at it from an economic view? Are we looking at perfect and imperfect markets or is only about the working poor?

Theory

The model of economic theory that relates to this issue would be Supply and Demand. The supply and demand being one of the most fundamental concepts of a market driven economy represent a classical view. Demand refers to how much (quantity) of a product or service is desired by buyers. The amount of a product people are willing to buy at a certain price is the quantity demanded. Businesses are willing to supply more of a good or service at higher prices because the potential for profits is higher. Supply represents how much the market can offer. The amounts of a certain good...