Essay on What Does the Minimum Wage Do?
In many countries, there exist minimum wage standards which secure the employees’ rights to receive a pay covering at least basic needs. In the United States, the Fair Labor Standards Act securing minimum wages was enacted in 1938 (Henderson 52). As inflation and recessions affect the economy, minimum wages are adjusted. However, such increases put more pressure on businesses and might have an adverse impact on employment. There are both supporters and opponents of minimum wage increase. The key thesis of this paper is the following: minimum wage should be increased to ensure that workers can sustain their basic needs.
The increase of minimum wage will lead to a notable improvement of the quality of living of those people who live below the poverty line and close to the poverty line. In the United States, the proportion of such people is around 25% (Belman and Wolfson 67). Therefore, the increase of minimum wages will reduce social inequality and improve well-being of the poorest households.
Furthermore, the purchasing ability of these households will increase; taking into account the number of such households, these changes are likely to have a positive impact on the economy. In addition, those people who chose not to work because of high costs of transportation and accommodation might start looking for jobs after the increase of minimum wages (Neumark and Wascher 30). These changes might slightly increase the rate of employment.
The opponents of minimum wage increase state that the raise will lead to the growth of unemployment as businesses will slash jobs. In reality, businesses will indeed have to reduce costs, but the weight of low-paying jobs in overall business expenses is low, so companies will be more likely to reduce the pay for white-collar jobs or slash operating costs in some other ways (e.g. optimizing their supply chain, reducing waste, etc) (Tucker 14).
One more argument in support of the minimum wage is the fact that the raise will urge businesses to improve performance in order to optimize costs. Therefore, businesses will be encourages to reduce inefficiencies due to the increase of minimum wage. Therefore, it is recommended to increase minimum wage in order to support workers who have low-paying jobs and to achieve a slight economic boost.
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