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Minimum Wage effect on Higher Paid Employees

Explain why changes in minimum wage can affect higher-paid employees as well.

Please provide as much information as possible.

Solution Preview

The change in minimum wage is that it gradually increases over time. When we have a higher-paid employee, the employee is generally paid a certain amount based on his/her experience and academic training, and that is the set wage. The issue is that as minimum wage continues to gradually increase by a small amount each year (or whenever it is raised, based upon the government); the higher paid employee's wage remains the same. The more the minimum wage increases, the less chances of the higher paid employee receiving any increases in his/her pay. The problem is that the cost of living increases for everyone, not only ...

Solution Summary

This solution explains why changes in the minimum wage rate affect higher paid employees. A comprehensive discussion is provided.