Two Sides of an Argument: Minimum Wage
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Is a Minimum Wage Law Beneficial or Detrimental to a Country’s Economy and Citizens?
Minimum wage is defined as the lowest hourly, daily or monthly pay that employers may legally pay to workers. Although there are minimum wage laws in most countries, it still remains a controversial argument. While proponents of the law say that it increases the standard of living of workers, reduces poverty and inequality, boosts morale, and forces business to be more efficient, opponents of the law say that it increases poverty, increases unemployment, and is damaging to businesses.
Minimum wage is definitely beneficial to the workers it has a direct impact on. Those who are directly affected by the minimum wage are mostly people who have been exploited and paid unfairly low wages, which can often be too low to support themselves or their families. When the minimum wage is implemented, they are legally obligated to receive a higher wage, and therefore their standard of living increases. The increased income can also push them over the poverty line and reduce poverty in that country. Increasing the lowest wages can also reduce income inequality, and therefore reduce the wealth gap. Governments have a responsibility to ensure that people have enough to live on.
The introduction of a minimum wage can also become a positive economic stimulus. As low-income families earn more money, they are more likely to spend more, increasing aggregate demand and putting money back into the economy. The American Economic Policy Institute says: "By increasing workers' take-home pay, families gain both financial security and an increased ability to purchase goods and services, thus creating jobs for other Americans."
However, the minimum wage may have negative impact on employment rates. As the cost of labour increases, businesses (especially small, local ones), are often put under significant pressure as they struggle to make profit or even breakeven. These employers would therefore be unable to hire as many people. This may result in the firing of low skilled labour. American Congressional Budget Office report that showed a wage increase could lead to the loss of 500,000 jobs.
Opponents of the minimum wage also contend that there are viable alternatives to the minimum wage that can reduce poverty. Some of the solutions presented are education and subsidies from the government to benefit low-income families. Minimum wage is fickle because it is difficult to predict what will happen! Some markets might be able to absorb the change, while others might struggle. Some companies will be able to absorb the increased labor costs, while others with thin profit margins might cut their workforce or raise prices. But I believe the discussion of both sides of the minimum wage argument, along with any alternatives, is productive, as long as legislators are able to cooperate and work together for the overall aim of minimum wage- to reduce poverty, increase standard of living, and lessen inequality.