The minimum wage issue is one of the biggest political debates consuming our country right now.
Democrats have been fighting to raise the minimum wage to help low-income Americans make ends meet, while Republicans have blocked every attempt, claiming that doing so would result in massive job losses due to increased labor costs for businesses.
Although the Republican argument seems intuitive and logical, it actually holds no weight when you take economic theory and apply it to the real world.
The biggest argument against raising the minimum wage is that there would be massive job loss due to the microeconomic laws of supply and demand. The belief is that raising the minimum wage level would cause employers to eliminate jobs in order to contend with the increased labor costs.
However, a basic review of the principles that need to be in place for the laws of supply and demand to work will show that although theoretically the argument is true, in the real world, it holds no merit.
The laws of supply and demand concerning labor and wages assume that the demand of jobs is equal to the supply of jobs. In the current economy, this is not true by any means.
The number of low-income jobs demanded is already much higher than the number of jobs that are available. Between individuals working at fast food chains to try to raise a family and high school students who are trying to make some spending money, unskilled jobs already have a demand that is greater than the supply.
So in both of these situations, there is more demand for jobs than the supply, not because of how great it is to work minimum wage jobs, but because these consumers need money to spend on goods and services — including those that are offered by companies that hire minimum wage employees.
In other words, people demand jobs because they need income. People demand income so they can spend this money to purchase goods and services. Therefore, by the transitive property, people demand jobs so they can spend money on goods and services.
Raising the minimum wage would mean that businesses' total profit would still increase despite the increase in labor cost due to the simultaneous increasing demand for income.
People will save some of their money, and they will spend some of their money. People who have less income need to spend a larger proportion of their income on basic needs: food, water, shelter and utilities.
A recent study by the Pew Research Center showed that 86 percent of minimum wage jobs are in food preparation and sales. Because of this, a majority of the money that would be given to employees via raised minimum wage would be given right back into the country's economy, raising the demand for goods and services and increasing the need for businesses to create more jobs in order to meet the new raised public demand.
Raising the minimum wage would prove to be a great boost for both consumers and businesses contrary to the argument that increasing labor costs would result in decreased jobs.
Republicans have been saying for decades that businesses and the wealthy people who run them are the job creators, but that is simply not true. The true job creators are the consumers.
While conservatives keep claiming that businesses are the job creators and that government has to cater to business needs over consumer needs, a basic review of supply and demand proves that "conservative" theoretical economics only holds water because in our country, demand will always be greater than supply.
There will always be hungry people who cannot afford food and there will always be people living on the streets because they don't have the money to afford housing.
It's human nature to want more than you have. As my old trumpet teacher used to tell me, “In a country where you can become a millionaire by cutting a hole in a blanket and selling it on TV, there is a market demand for just about anything.”
People demand goods and services, but they need money in order to purchase these.