The Impact of Increasing Minimum Wage
The continual increasing minimum wage since 1938 has been affecting people living in the United States both for good and for bad. The current raise in minimum wage for people in Washington to $11 per hour has seen the economy of the State enlarge severely. In most occasions, a raise in the minimum wage follows a raise in people's earning according to Tu. The little pay is important in some individuals` lives mostly people from families that are unable to meet their entire needs. Tu opines that the minimum wage raise in Washington has been steadily increasing, followed by some economic benefits and costs. Indeed, while examining the raise in minimum wage in Washngton, one should not only focus at how it has continuously impacted on people of Washington positively but also to base its views towards examining some negativity it causes to people.
Increasing Minimum Wage causes Increase in income
The increase in minimum wage among individuals in the Washington States follows an increase in peoples` respective wages. Whenever the minimum wage increases, the purchasing power of money will reduce, therefore to maintain people's demand; their salaries should increase. In case there is the additional price of goods and services, every individual's requirement changes irrespective of their level of pay; meaning, the increase in minimum wage should always cut across all groups of people not leaving out others. Example, in the aluminum industry in Washington State, a rise of payment from $11 per hour to $15 per hour will make the production cost to go high. The purchasing price of products will rise not only to people who earn a low wage but also those paid high salaries (Haas, 2016). The economic level of the country or State in times of low wage does not grow at a more accelerated rate because less disposable income remains for people to invest. An increase in the minimum wage without increasing their salary will make people spend more and left with little for them to invest in capital goods to boost the economic growth (Tim Worstall, 2016). Similarly, the level of labor supply will reduce. Therefore workers will prefer to cut on their working hours to working more hours and earn less. Therefore, to maintain equilibrium between labor demand and labor supply, an increase in minimum wage should be followed by an increase in people's salary for the economy to retain its development momentum. Minimum wage among workers reduces their ability to work compared to those doing similar work or working an equal number of hours and get a higher pay. If a person works on aluminum industry and is paid low compared to another one working at Uber-Company in California and working an equivalent number of hours, the output per labor for an individual working with Uber-Company could be higher than the counterpart at aluminum industry (Bartash, 2014). An increase in wage acts as a bribe for the person to improve their work output. Therefore, any minimum wage increase should increase salary to have worker's output growth across the firm (Tim Worstall, 2016).
Minimum Wage is not suitable for People with Families
The minimum wage has been useful to boost the standards of individuals especially in schools and those in colleges because some have few expenses, although it takes them time to meet their targets. Those coming from financially disadvantaged families mostly work for the little wage pay to sustain themselves in school with the aim to get more beneficial jobs after acquiring certificates and degrees (Tim Worstall, 2016). The benefits that result from these low wage pay takes time and also needs a lot of sacrifice and commitment; it is tiresome to meet their targets. The minimum wage should not be imposed on people working in Washington State, especially those with families because they will strain a lot to maintain their living standards due to more expenses. Increasing wage from $11 per hour to $15 per hour makes the nominal income of people to increase; after the costs, it leaves people with less income to invest due to the price increase. The living standards of people can be better off if the raise in wage does not affect the price of goods and services; people will have more disposable income to invest. A salary increase to people of Washington will have both advantages and disadvantages to the State, although cons will be more felt compared to pros.
Benefits of Increase in Minimum Wage
Increasing minimum wage will make those earning less to start making more, this increases their level of spending hence economic growth. The increase in expenditure make the economy to grow because there will be more investments; those quitting job will be willing to continue working, and the salary paid can enable them to invest in their businesses (Halvorson, 2014). The more the wage, the higher the income at their disposal; these are the income people spend investing in capital goods that enable the State to produce more outputs in the long run; the economy expands hence improved living standards of Washingtonians. The government provision for some socials programs that benefits its citizens like Washington Park especially for those who cannot afford to pay for private ones will reduce. When the wage increases, it will be easy for most people to afford some expenses which were undertaken by the government. Similarly, the growth in wage may induce people to spend their income to create private recreation centers unlike depending on the government to provide these services to them.
Cons of Wage Increase
The largest number of employees who will be laid off because of increased budget for employers to maintain all their employees. The wage increase will force companies to increase the salary of all their employee, and because employers want to operate within the budget, it will force them to lay off some of the workers. Some companies may decide to use more of technology than labor because machines may be cheaper and could only require few laborers to run them (Halvorson, 2014). Therefore, a wage increase will reduce the growth of the economy because few people will be employed and as a result, there will be fewer investments due to little money for investments. The price of final products will increase to enable producers to afford to pay their workers. The increase in price will discourage people from buying some goods produced that may be essential in their life. As a result, there will be the high cost of living. The increased price make people spend much of their money to acquire goods, unlike when the prices are low when there is no minimum wage increase because individuals will spend less buying products (Tim Worstall, 2016). High competition level at work makes the less experienced workers not get chances to work. Greater pay makes people with experience but not having jobs to enter the job market. There will be more competition among employers over the limited qualified labor. Therefore the posts held by those who are unqualified have to be given to skilled workers. Washington is having more supply of skilled labor compared to work demand; there will be high unemployment level in the State which could lead to migrations to other States (William, 2016). The increase in the minimum wage among people in Washington will raise the degree of crime in the State because many people will be unemployed, and to keep to their living standards, it will force them to commit crimes like robbery. The findings by Beauchamp (2013) shows that in 2013, "...crime in the State increases among people of age 14-30 years in the case of an increase in the minimum wage by around 1.9 per cent"(Baker & Kimball, 2013). There are high chances for the State to experience this growth in the level of crimes if it has to raise the minimum wage of people to $15 per hour because we shall have more unemployment in the State.
Increased Minimum Wage Worsens Economic State and Lives of People
The current level of wage in the State has already made the life of people in Washington very miserable because most goods and services are not affordable. Based on the findings by Shannon (2013), "...minimum wage increment will have to lift around 730,000 people and leave the minimum worker with almost $600 in their pocket". It will lead to less than $3 billion injected into the economy annually. The extra $600 may not be enough to support the businesses in the economy. As a result, the whole community will suffer because expenditure will exceed the additional income added. The increase in minimum wage will lead to the closing of some businesses in the State. An increase in wage will affect most of the small businesses in the region, and since the economy depends on these little companies, the State may experience a recession. An economy experiencing depression it is not easy for it to recover in the short run, and some mechanism to make it heal could further worsen the situation. Therefore an increase in minimum wage from $11 per hour to $15 per hour will cause some small businesses and companies to close. There is reduced upward mobility in the labor market. Indeed, "Increase in minimum wage will reduce workers motivation to reach the next highest level in job hierarchy" (Perry, 2013). Therefore, for people to reach the maximum rank job, there should exist a variation in the wage among different levels of workers to make those in a lower level eager to arrive at the level that is higher to earn more.
How Increased Wage can be rewarding
There is reduced income inequality among people because those making low pay will have wage increase to reduce the gap existing between low and high wage earners. When the minimum wage of Washingtonian that earns fewer gains while maintaining the salary of those making more, the difference in the income will reduce if the trend continues then the income inequality will not be much as it is now. The unbalanced earning especially for people in the same job group has contributed towards discouraging some workers because they make less than their counterpart in the same position. The level of poverty among the poor will, in the long run, reduce. Poverty is mostly as a result of low pay among working people; their demand exceeds the earnings, and income get depleted before the entire demand is met (Tim Worstall, 2016). When the wage increases to $15 per hour, people are likely to meet the requirements as expected, and in case the payment exceeds the demand, they will have extra to save for future demand. These savings, in the long run, will eliminate the poverty level or reduce the number of poor people.
The increase in the minimum wage of people of Washington usually stimulates the growth of the economy, but in a real sense, the adverse effects it causes to citizens seem to outweigh the benefits to people and the economy in general. Sometimes these fees are raised to a level that makes people not afford some basic goods and services which they cannot do without; this makes pay increase seen to be problematic for society. The challenges in the State of Washington has been to come up with a stable level of minimum wage that will see the State's activities stabilize without imposing much stress on the people, and whether these increase heavily oppress the people of Washington alone or it also affects those from other States in the same way.
- Baker, D., & Kimball, W. (2013). The Minimum Wage and Economic Growth. CEPR Blog, 1-24. https://doi.org/10.1515/bejeap-2013-0130 - Bartash, J. (2014). Workers more productive, but paychecks lag - MarketWatch. http://www.marketwatch.com/story/workers-more-productive-but-paychecks-lag-2014-12-03 - Haas, E. (2016). Washington's Minimum Wage Increase Causes Spike in Childcare Costs - Erika Haas. https://townhall.com/tipsheet/erikahaas/2016/11/16/child-care-costs-spike-after-minimum-wage-goes-up-n2246718 - Halvorson, C. (2014). The Pros and Cons of Raising the Minimum Wage | When I Work. http://wheniwork.com/blog/smb/business-trends/the-pros-and-cons-of-raising-the-minimum-wage/ - Perry, M. J. (2013). Don Boudreaux on income inequality and the minimum wage • AEI _ Carpe Diem Blog » AEIdeas. - Tim Worstall. (2016). As I Predicted, Seattle's Minimum Wage Rise Is Reducing Employment. https://www.forbes.com/sites/timworstall/2016/07/26/seattles-minimum-wage-rise-is-reducing-employment-in-seattle-i-was-right-in-predicting-this/#8cb310b7f4c8 - Tu, J. I. (2016). Voters approve minimum wage increase to $13. http://www.seattletimes.com/seattle-news/politics/washington-state-minimum-wage-initiative-1433/ - William, F. (2016). U.S growth hits new low as migration to the Sun Belt continue. https://www.brookings.edu/blog/the-avenue/2016/12/23/u-s-growth-rate-hits-new-low-as-migration-to-the-sun-belt-continues/