In theory, when an increase in the minimum wage increases the cost of low-wage workers, companies should want to hire fewer workers, however in reality this basic theory could be wrong according to Plumer B (2013) While some studies have found a link between a higher minimum wage and higher unemployment, many others, such as a recent UC Berkeley paper that exploited differences across state lines, have not found a link between higher minimum wage and higher unemployment. John Schmitt of the Center for Economic and Policy Research explores other possible reasons why a modest increase in the minimum wage might not have a significant impact on employment levels. According to his study, instead of hiring fewer workers, labor markets can respond in the following ways: • Employers can reduce benefits, hours or training. • Employers can decrease wages for more experienced workers by delaying or limiting salary increases or bonuses. • Employers can become more efficient. • Companies can increase the prices of their products or services. • Companies can simply settle for lower profits by absorbing rising labor costs. • Companies can save on labor costs, as a result there is less employee turnover. • Workers can respond by voluntarily working harder. Schmitt concludes that how individual businesses react to the increase depends on a complex set of circumstances that economists cannot fully grasp or explain, and this may explain why economists often have difficulty establishing a clear link between a minimum wage higher and an increase in the minimum wage. higher unemployment.INTRODUCTIONThe minimum wage was established by the Fair Labor Standards Act of 1938. Overall, the minimum wage was established to help alleviate the standard of living of low-skilled workers, whether it be the minimum… .. ..I think the basic theory is still valid. Even if the employer does not decrease its demand for labor because another theory states that the labor category is inelastic, I believe the employer will reduce labor expenses that could directly or indirectly impact employees to compensate the increase in wages. We've been told that nothing is free, so why shouldn't employers change their behavior by hiring fewer employees or cutting labor expenses. In my opinion, if they didn't react at all, they would be giving away free money to their employees and we all know there's no such thing as a free lunch, especially in today's economy, so why start believing it now? Putting all theories aside and evaluating the current situation, the minimum wage increases unemployment, however the magnitude is determined by whether the increase was small or large.