Arguments In Support Of Minimum Wage

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Over the last two years, the minimum wage proposal has sparked several controversies. The program is a statute passed by state legislatures to shield employees from unequal wages (Hohberg and Lay 1). About every developed country, as well as several emerging countries, has implemented a minimum wage program in order to reduce income disparities. The regulation forbids businesses from paying wages that are less than the sums specified. There is, however, no global standard minimum wage and it varies depending on the law of the state in question. For example, some states and cities in the US have enforced higher minimum wages than what is stipulated by the federal government. Proponents of the policy argue that it is essential in ensuring fair pay and reduction of poverty. However, some experts contend that the wage law presents multiple challenges and problems (Hohberg and Lay 2). The debate has prompted various scholars to explore the issue of minimum wage in a bid to come up with more informed views on the effectiveness and drawbacks of the policy. The intent of this annotated bibliography is to present an insight into some of the findings supporting the minimum wage policy.

Annotated Bibliography

Bhorat, Haroon, et al. “The impact of sectoral minimum wage laws on employment, wages, and hours of work in South Africa.” IZA Journal of Labor & Development, vol. 2, no. 1, 2013, p. 1.

In this article, the authors examine the impacts of the minimum wage by focusing on specific sectors in the South Africa’s labour market. According to the source, arguments against minimum wage have been founded on the notion that there is a negative relationship between the policy and employment. It has been widely argued that employers’ response to minimum wage could lead to more harm than good, for instance, reduction in employment opportunities and work hours. However, this study revealed that there was no significant impact on employment on the sectors examined. More importantly, the results indicated that minimum wage led to a significant upsurge in real hourly earnings, which is enough to offset any negative effects of the minimum wage. The results of this study are crucial in refuting previous arguments against minimum wage policy.

Keywords: Minimum wage, South Africa, hours of work, employment.

Sun, Wenkai, et al. “Minimum wage effects on employment and working time of Chinese workers—evidence based on CHNS.” IZA Journal of Labor & Development, vol. 4, no. 1, 2015, pp. 1-22.

The article also contradicts the view that minimum wage has a negative impact on employment. The authors examined the effect of minimum wage on employment, wages, and work hours among Chinese employees using a model controlling individual traits, minimum pay of preceding period, regional features, and fixed impacts of states and years. The results of the study indicated that there was no significant effect of minimum wage on employment regionally. Instead, the policy made significant contributions to pay increase more so among low-income workers. However, there were some negative effects on employment only for workers in private and individual businesses. Regardless, the findings imply that minimum wage does not reduce employment opportunities but has the potential of enhancing the well-being of low-income workers.

Keywords: Employment, income, working hours, minimum wage.

Leigh, J. P. “Could raising the minimum wage improve the public’s health?” American Journal of Public Health, vol. 106, no. 8, 2016, pp. 1355-1356.

The article supports the argument that the minimum wage should not be abolished because the policy has helped in improving public health. The author reviews some previous studies that were conducted to determine the relationship between minimum wage and citizens’ wellbeing. For instance, according to Leigh, one study revealed that $15 minimum wage would help in reducing premature deaths from 2800 to 5500 in a five-year duration. The author also argues that increased minimum wages have been known to improve mental health and work satisfaction as well as increasing the opportunity cost of engaging in unhealthy lifestyles.

Keywords: Minimum wage, public health, unemployment, family income.

McCarrier, Kelly P., et al. “Associations between minimum wage policy and access to health care: Evidence from the behavioral risk factor surveillance system, 1996–2007.” American Journal of Public Health, vol. 101, no. 2, 2011, pp. 359-367.

The study examined the relationship between minimum wage policy and access to healthcare amongst low-skilled labourers in the US. The author analyzed data sets comprising of individual-level pointers of uninsurance and unmet health needs. According to the findings, there is a relationship between minimum wage policy and a reduced likelihood of low-skilled employees experiencing cost-related obstacles to required health needs. The study also revealed that there was no link between the policy and lack of health insurance as propagated by those opposed to the policy. The findings seem to rebut the argument that the policy has detrimental impacts on access to healthcare and, therefore, should be abolished.

Keywords: Minimum wage, healthcare, medical needs, low-skilled workers, uninsured.

Reeves, Aaron, et al. “Introduction of a national minimum wage reduced depressive symptoms in low-wage workers: A quasi-natural experiment in the UK.” Health Economics Journal, vol. 26, no. 5, 2016, pp. 639-655.

The article provides evidence that minimum wage policy has the potential of improving people’s health. The authors used longitudinal data that was obtained from the British Household Panel Survey to examine the effects of the policy on workers’ health. The findings revealed that the adoption of national minimum wage in the UK enhanced psychological health among low-wage workers, decreasing their likelihood of apprehension and stress. The findings also contradicted the view that additional funds might lead to the consumption of substances that affect health such as tobacco, as there was no evidence on increased tobacco use.

Keywords: Natural experiment, minimum wage, mental health, depressive symptoms.

Saari, Yusof M., et al. “Estimating the impact of minimum wages on poverty across ethnic groups in Malaysia.” Economic Modelling, vol. 54, 2016, pp. 490-502.

The article supports the view that minimum wage policy is effective in reducing poverty among the population; therefore, it should not be abolished. The authors estimated the potential effects of the policy on poverty reduction among various ethnic groups in Malaysia. The study adopted a procedural approach that took into account the earnings and spending impacts of minimum wages. An analysis of the findings revealed that minimum wage has the potential of boosting the wages of the poor people, which consequently reduces poverty for all communities. Therefore, this article is important because it adds to the existing evidence on the effectiveness of minimum wage policy in reducing poverty. The implication is that the government can use the wage law to reduce poverty among its population, and, therefore, it should not be abolished as advocated for by opponents of the minimum wage.

Keywords: Minimum wages, poverty, input-output, ethnic groups, income, expenditure.

Dahl, Gordon B., and Lance Lochner. “The impact of family income on child achievement: evidence from the earned income tax credit.” American Economic Review, vol. 102, no. 5, 2012, pp. 1927-1956.

The article provides additional evidence on the positive impact of extra family income. The authors specifically examine the impact of family income on child achievement in relation to earned income tax credit. Even though the authors use earned income tax credit as the main variable, the concept could be used to support the argument that minimum wage policy increases family income, which has a positive effect on children growing up in poor families. For instance, the results indicate that an increase in household earnings has a significant impact on a child’s educational achievement. On that note, it could be argued that the minimum wage policy could have a positive impact on a child’s educational achievement, therefore, should not be abolished.

Keywords: Child achievement, test scores, family income, children, earned income tax credit.

Bárány, Zsófia L. “The minimum wage and inequality: The effects of education and technology.” Journal of Labor Economics, vol. 34, no. 1, 2016, pp. 237-274.

The article supports the argument that the minimum wage policy can help in reducing income inequality, therefore, should not be abolished. According to the study findings, minimum wage affects the general level of inequality through various channels. For instance, a reduction in minimum wage broadens the range of competencies in the labor market, thereby increasing the variability between any two percentiles in the distribution. In addition, a reduction in the minimum wage can lead to a decrease in the skill premium per productivity unit, consequently reducing inequality. Therefore, it means that the minimum wage policy can be an effective tool in reducing income inequality, hence should not be abolished.

Keywords: Inequality, education, technology, labor market, productivity.

Lin, Carl, and Myeong-Su Yun. “The effects of the minimum wage on earnings inequality: Evidence from China.” Research in Labor Economics, vol. 44, 2016, pp. 179-212.

According to the article, the minimum wage policy should be considered as a vital component of public policy for reducing income inequality. The conclusion was arrived at after examining the contribution of the minimum wage in reducing inequality in China. The authors used 2004 to 2009 wage panel data and information from a Chinese household survey. Based on the findings, there was a significant reduction in inequality after an increase in the minimum wage over the analysis period. This source is important because it supports the view that the minimum wage policy reduces inequality, therefore, should not be abolished.

Keywords: Inequality, China, Minimum wage, income.

Hohberg, Maike, and Jann Lay. “The impact of minimum wages on informal and formal labor market outcomes: evidence from Indonesia.” IZA Journal of Labor & Development, vol. 4, no. 1, 2015, pp. 1-25.

In this article, the authors investigate the effects of minimum wage on employment and wages with reference to Indonesia. The study uses information collected between 1997 and 2007. An analysis of the data suggests that the policy has a substantial positive effect on formal segment wages. The results also indicate that there are no spillover effects on informal laborers. As regards employment, the authors did not find any considerable negative effects of minimum wages on the likelihood of being formally in employment. The finding suggests that employers normally adopt approaches other than employment to outweigh the probable negative employment outcomes. The results of this study are important in refuting some of the arguments presented by opponents of the minimum wage policy.

Keywords: Informal sector, employment, wages, Indonesia, wage spillover.

Outline

Introduction

Minimum wage policy is a law adopted by state governments to protect workers against unfair remuneration.

As much as proponents of minimum wage argue that it is essential in ensuring fair pay and reduction of poverty, some experts contend that the policy presents multiple challenges and problems.

Thesis: Minimum wage policy should not be abolished.

Arguments for minimum wage policy

There is no significant impact of wage base policy on employment as claimed by opponents. On the contrary:

It can lead to a significant upsurge in real hourly earnings, which is enough to offset any negative effects of the policy (Bhorat, et al. 23).

The policy has made significant contributions to pay increase more so among low-income workers (Sun, et al. 16).

The wage law has a substantial positive effect on formal segment wages (Hohberg and Lay 18).

The minimum wage policy should not be abolished because it has helped in improving public health and well-being of low-income families.

A study revealed that minimum wages have been known to improve mental health and work satisfaction as well as increasing the opportunity cost of engaging in unhealthy lifestyles (Leigh 1355).

There is evidence refuting a link between the policy and lack of health insurance as propagated by those opposed to the wage law (McCarrier, et al. 363).

The implementation of national wage in the UK enhanced psychological health among low-wage workers, decreasing their likelihood of apprehension and stress (Reeves, et al. 652).

Minimum wage policy is effective in reducing poverty among the population, therefore, it should not be abolished.

A study revealed that minimum wage has the potential of boosting wages of the poor people, which consequently reduces poverty for all communities (Saari, et al. 499).

Increase in household earnings has a significant impact on a child’s educational achievement (Dahl and Lochner 1951).

Minimum wage policy can help in reducing income inequality, therefore, should not be abolished (Bárány 270).

Works Cited

Bhorat, Haroon, et al. “The impact of sectoral minimum wage laws on employment, wages, and hours of work in South Africa.” IZA Journal of Labor & Development, vol. 2, no. 1, 2013, p. 1.

Bárány, Zsófia L. “The Minimum Wage and Inequality: The Effects of Education and Technology.” Journal of Labor Economics, vol. 34, no. 1, 2016, pp. 237-274.

Dahl, Gordon B., and Lance Lochner. “The Impact of Family Income on Child Achievement: Evidence from the Earned Income Tax Credit.” American Economic Review, vol. 102, no. 5, 2012, pp. 1927-1956.

Hohberg, Maike, and Jann Lay. “The impact of minimum wages on informal and formal labor market outcomes: evidence from Indonesia.” IZA Journal of Labor & Development, vol. 4, no. 1, 2015, pp. 1-25.

Leigh, J. P. “Could Raising the Minimum Wage Improve the Public’s Health?” American Journal of Public Health, vol. 106, no. 8, 2016, pp. 1355-1356.

Lin, Carl, and Myeong-Su Yun. “The Effects of the Minimum Wage on Earnings Inequality: Evidence from China.” Research in Labor Economics, vol. 44, 2016, pp. 179-212.

McCarrier, Kelly P., et al. “Associations Between Minimum Wage Policy and Access to Health Care: Evidence From the Behavioral Risk Factor Surveillance System, 1996–2007.” American Journal of Public Health, vol. 101, no. 2, 2011, pp. 359-367.

Reeves, Aaron, et al. “Introduction of a National Minimum Wage Reduced Depressive Symptoms in Low-Wage Workers: A Quasi-Natural Experiment in the UK.” Health Economics Journal, vol. 26, no. 5, 2016, pp. 639-655.

Saari, Yusof M., et al. “Estimating the impact of minimum wages on poverty across ethnic groups in Malaysia.” Economic Modelling, vol. 54, 2016, pp. 490-502.

Sun, Wenkai, et al. “Minimum wage effects on employment and working time of Chinese workers——evidence based on CHNS.” IZA Journal of Labor & Development, vol. 4, no. 1, 2015, pp. 1-22.

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