Essay Example on Minimum Wage Debate: Pros & Cons

Introduction

Minimum wage refers to the lowest amount of money that employers are legally entitled to pay their employees. Therefore, in other words, the minimum wage is an amount of money below which workers cannot offer their labor services. In recent years, the debate about increasing minimum wages has emerged as a crucial and divisive topic in the U.S. While some people are firmly in support of increasing the minimum wage, others are primarily against the debate as they argue that such an act might tag along with adverse consequences. However, the minimum wage should be raised from its current 7.25 US dollars per hour as it would improve the status of the economy and spur the growth of jobs, reduce levels of poverty and minimize government spending on different welfare programs.

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Benefits of increasing the Minimum Wage

Economic and Job Growth

Raising the minimum wage from its current value would help improve the economic status and spur job growth as the extra money paid to employees would be injected back into the economy. As it currently stands, America's poor people are ordinarily unable to save the money they earn in the form of wages. The inability to save is attributed to the existence of different basic needs, which require an individual to spend the money they have right away (Eyraud & Saget, 2005). Therefore, as they are not accustomed to saving, increasing the minimum wage would enable poor people in the American society to carter for the basic needs they were unable to previously incur the costs hence injecting money back into the economy (Eyraud & Saget, 2005).

Moreover, by spending their money on different basic needs as a result of increased minimum wages, such people would evoke an increase in cash flow within the economy, thus improving its overall status (Eyraud & Saget, 2005). Furthermore, spending money through making purchases would similarly increase the demand for local businesses and services, consequently creating over 85,000 thousand new jobs which also improve the status of the economy by reducing the problem of unemployment (Eyraud & Saget, 2005). Professionals from the Economic Policy Institute further well support such an opinion through a report which indicates that an increase in minimum wages from the current 7.25$ to 10$ per hour would yield an increase of over 32 billion dollars in net economic activity (Eyraud & Saget, 2005).

Reduce Levels of Poverty

As a significant percentage of people live deplorable lifestyles, increasing the minimum wage would reduce the levels of poverty. Across the U.S, many families cannot enjoy the luxury of other people from wealthy backgrounds experience as a consequence of low minimum wages, which make it impossible to carter for the day to day basic needs. As a result, one generation of American citizens after another is born into abject poverty which consequently tends to yield issues of long-term illiteracy due to the inability to attend school as well as increased cases of depression (Kaufman, 2010). However, increasing the minimum wage from the current 7.25$ per hour would elevate millions of families from poverty, as many people would witness an increase in their overall wages.

Therefore, with an increase in the wages, such families would be able to carter for their different basic needs such as paying rent and school fees thus improving the lifestyle of many American households as well as reducing the levels of poverty across the United States (Kaufman, 2010). A study carried out by the University of Massachusetts supports this particular perspective by suggesting that an increase in the minimum wages would primarily reduce poverty among Americans by 1.7% (Kaufman, 2010). Over time, according to the research, the poverty level would further reduce by another 2.5% (Kaufman, 2010). Such statistics tend to mean that over four million Americans would immediately be elevated from poverty as a result of increasing the minimum wage, while another six million would abandon poverty in the long-run (Kaufman, 2010).

Minimize Government Spending

Since different people depend on social incentives from the government for survival, increasing the minimum wage would reduce the spending on such programs and even better, save the taxpayer billions of U.S dollars in taxes. As many employers within the U.S pay their employees the minimum wage as required by the American labor laws, many people and their families are finding it difficult to survive especially putting into consideration the current economic status (Neumark, 2018). Therefore, as individuals cannot fully satisfy their needs with the existent minimum wage, they are compelled to seek the assistance of the government through the different social programs which are initiated and funded via taxes remitted by American citizens (Neumark, 2018).

However, increasing the minimum wage would enable many people to carter for their different basic needs as they would witness an increase in the amount of money they earn consequently minimizing the government spending on various social programs aimed at assisting Americans (Neumark, 2018). Such a perspective is supported in a report by the Economic Policy Institute, which suggests a 6% increase in minimum wages would free over 1.7 million Americans from dependency on government programs (Neumark, 2018). Moreover, the government would also shave off over 7 billion dollars from the annual spending on support programs (Neumark, 2018).

Criticism against Increasing the Minimum Wage

Regardless of the advantages tied to increasing the minimum wage from the current 7.25$ per hour, some people within the American society would mostly disagree with the argument presented in this write-up. According to such individuals, raising the minimum wage would tag along with adverse effects such as massive job losses for low skilled laborers and the young within a particular labor force as employers would be unwilling or reluctant to incur extra costs in the form of increased wages for people with low skills or minimal work experience. Furthermore, according to such people, increasing the minimum wage would also yield high prices for goods and services as employers would transfer the extra costs incurred in the form of increased wages to their consumers.

However, such criticism is inferior when compared to the argument presented in this particular paper as different research carried out previously indicate that there exists little or no negative connection between minimum wages and the aspect of employment as well as the price of goods and services. An excellent example of such research is a study carried out in 1994 by Alan Krueger and David Card evaluating an increase in minimum wages within the food industry. According to this particular study, which was corroborated by different economists like Hristos Doucouliagos and T.D. Stanley, increasing the minimum wages had no negative implications on employment or prices of goods and services within the food industry.

Conclusion

Hence, as exhibited, the minimum wage should be increased from its current value of 7.25$ per hour as it would improve the economy and spur job growth, reduce levels of poverty and minimize government spending on social programs. However, others do not agree with such an opinion as they argue that increasing the minimum wage would result in massive job losses for low skilled employees and the young as well as high prices of products and services for consumers as a result of an increase in the costs of labor. Regardless, rather than a wage of 7.25 dollars per hour, employees should receive a bare minimum of 15 dollars per hour spent working.

References

Eyraud, F., & Saget, C. (2005). The fundamentals of minimum wage fixing. International Labour Organization.

Kaufman, B. E. (2010). Institutional economics and the minimum wage: broadening the

theoretical and policy debate. ILR Review, 63(3), 427-453. Retrieved from https://journals.sagepub.com/doi/abs/10.1177/001979391006300304

Neumark, D. (2018). Employment effects of minimum wages. IZA World of Labor. Retrieved from https://wol.iza.org/articles/employment-effects-of-minimum-wages/long