Negative Effects of Increasing the Minimum Wage Law

The minimum wage law is a labor law that benefits the workers. However, there are some negative effects of this law and the marginal workers are the real losers of this. Some of the negative effects of this law are listed in this article.

Likely to increases the unemployment rate
If people demand for increase in the minimum wages, then employers will count this with the productivity of the employees. Therefore, most working people with good productivity are not affected – whereas, the employees who are less productive are more likely to lose jobs, especially, the young employees or the teenagers as they have a little work experience and takes up jobs that require fewer skills.

Supports teenagers to dropout
Some lawyers or advocates are arguing that the teenagers shouldn’t work and go to high schools or college anyway; so, this minimum wage law doesn’t harm them rather encourages them to not to do work in the early ages, which harms their lives later. Higher minimum wage causes many teenagers dropout from the employment.

Decreases the job benefits
Higher minimum wages somehow lead to the decrease in the job benefits. In other words, if the minimum wage increases, the employer tries to adjust the wages by reducing the amount from the employee compensation such as health benefits, insurance benefits and cutting down in the job training, etc. In this way, the employee loses some of the job benefits.

Reduced competition
By increasing the minimum wages, employers are trying to remove the less-skilled workers with lower wages. So, there will not be a competition for skilled jobs that have the minimum wages.
Many labor unions and large employers who pay more than the minimum are also pushing to increase the minimum wages. This makes the situation of low-wage competitors difficult.

Other effects of minimum wages

    • Boost employers for installing the labor-saving devices.
    • Increasing the crime rates in teenagers because of un-employment.
    • Increasing the period of un-employment for the low-wage workers, especially when there is economic downturns.
    • Improving the turn-over of the job.
    • Likely to fuel inflationary pressure in the economy.
    • Making the workers drive into un-covered jobs and thus, decreasing the minimum wages in those kind of sectors


These are the negative effects of increasing the minimum wage laws. So, every employee must be aware of these minimum wage law and its negative effects.

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