So America is stuck at a high unemployment rate right now. Some wonder if this is a new normal, or if the economy is just taking a long time to recover, and may even have been stalled somewhat by the government's various policies (massive spending, a huge debt, the biggest (or one of the biggest) peacetime deficit in history, etc...). Now the minimum wage is a price control. It artificially increases the price of labor to a business. And naturally, when you artificially increase the price of something, people buy less. So if you create a high minimum wage, you can hike the unemployment rate through that alone. Now the nation has a national minimum wage, but many states have their own even higher minimum wages as well.
The American economy is a very robust economy, so usually it can withstand a minimum wage so long as it isn't too high and still maintain full employment. However, with this major recession that has occurred, I am wondering, could the current minimum wages (states and national) be propping up the unemployment rate at the moment? One of the first things the Democrats did upon taking control of Congress in 2006 was to raise the minimum wage. While at the time this may not have had much of an effect, since the financial crisis hit and the recession developed, I am wondering if it is now a large burden on the economy that, if removed, could lower the unemployment rate?
I am wondering if Congress temporarily, as part of an economic stimulus package, put a year or two year hiatus on the minimum wage, and all the states were to do the same, with the idea to re-implement the minimum wages after the economy recovered fully, if this would have a major effect on the unemployment rate? Would it bring it down a couple of percentage points? Because even though the American economy can withstand minimum wages during good times, during a tough recession, the most severe since the Great Depression, I would imagine that the minimum wages are a massive unnecessary burden right now on the economy.
This situation won't happen, but it would be very interesting I think to see what the result would be economically if it did happen.
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