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Minimum wage debates have remained at the forefront of public discourse. For several decades, American workers have posed a challenge to labor markets, especially those that provide low-wage jobs that do not meet the basic necessities of life. Notably, crusades for a raise in the minimum wage became the focal point for achieving economic equality. The first minimum wage law was introduced in New Zealand in 1894, and since then, many nations, including the United States, have followed the proposal. The current minimum wage in the United States is $7.25 per hour. However, many workers claim that the current minimum wage is too low to sustain the standards of living and thus call for an increase to $10.10 per hour. Nevertheless, the firm opponents of minimum wage increase note that the increase will have a petite impact on reducing poverty levels together with income inequality. These opponents emphasize their point by asserting that raising the minimum wage will lead to many cases of unemployment, particularly to the low skilled personnel. Countries have to note that increasing minimum wage has a positive impact on the economy and it is a driver to economic development.

Purpose of Study

Arguments that focus on the means to improve and drive economic development and growth have noted that raising the minimum wage is fundamentally significant. This study will drive at examining the significance of increasing the minimum. It will refute arguments claiming that raising the minimum wage is hurting to the economy.

Opposing Argument on Increase of Minimum Wage

Opponents of minimum wage increase note that an increase in the minimum wage results in negative impact on the economy. Claims hold that minimum wage increase will result in unemployment particularly to the low-income earners. Liu indicates that a minimum wage raises with culminating into approximately 500,000 employment opportunities. In a study done by Liu involving 1,213 organizations and human resource professionals, it is reported that 38% of the workers who are presently paid by these companies will be laid off (Liu 42). The study noted that 54% of these organizations will also decrease their hiring rates. Economists note that this will particularly impact the private sector which is always on the move towards realizing higher profitability levels (Scheiber). Due to the reduces hiring levels and laying off of the workers, the aspect of increasing the minimum wage will result in higher poverty levels. Liu indicates that “their hours and employment decline, and the combined effect of these changes is a decline in earned income… minimum wages increase the proportion of families that are poor or near-poor” (Liu 56). Liu notes that, “the higher the wages, the higher the cost of production and thus the higher the prices of goods and services” (Liu 12). Scheiber states that this negatively affects the economy (Scheiber). There will be an increase in the inflation rate due to the increase in the prices of consumer goods.

Reasons Why the Minimum Wage Should be raised

The above argument of the opponents concerning minimum wage increase can be refuted on several grounds. Increasing the minimum wage is fundamental in raising the economic activities which will spur creation of jobs and realize growth of the economic. The Economic Policy Institute argues that “raising the minimum wage to $10.10 per hour from the current $7.25 per hour will have a positive result of injecting $22.1 billion net income into the US economy” (Economic Policy Institute). Furthermore, Kukathas notes that the move will lead to the creation of roughly 85,000 job opportunities. Definitely, an increase in the minimum wage will greatly help the low-income working individuals and hence, improve the entire economy. A raise of the minimum wage from $7.25 to $10.10 per hour will enable the salaries of 27.8 million workers to also be increased. Consequently, the workers will be able to take to their homes an addition of $35 billion wages (Leigh 11). According to the Economic Policy Institute, within the first phases of the wage raise, the economy of the nation will recognize a growth of about $22 billion. In the long-term, the wage raise will result in 85,000 job creation. Undisputedly, the noted aspect does refute the argument of the opponents which states that increasing the minimum wage will be hurting to the economy by causing unemployment. In an explanation given by The Federal Review Bank economists, it is contended that a minimum wage rise by approximately $1.75 will intensify the aggregate spending of the households to almost $48 billion (Eyraud 27).

Notably, this will boost the GDP levels culminating in the formation of employment opportunities.

Alleviating the nations’ minimum wage will result in a reduction of the poverty level and consequently increase standards of living of people. Undoubtedly, an employee earning a minimum wage of $7.25 hourly gets $15,080 every year. The question is, is this income enough to help an individual escape from the challenge of poverty? According to the United States Department of Labor, it is reported that “increasing the minimum wage to $9 would lift 300,000 people out of poverty, and an increase to $10.10 would lift 900,000 people out of poverty” (United States Department of Labor). Besides, in the Forbes newspaper, Patton reports that “increasing the minimum wage to $10.10 is projected to reduce the number of non-elderly living in poverty by around 4.6 million, or by 6.8 million when longer term effects are accounted for” (Patton). Furthermore, the current minimum wages is little to enable an individual manage in payment of the daily essentials including payment of rental house (National Low Income Housing Coalition). Pacheco reports that 66% of the US people, who are paid less that $10 every hour do not have enough money in payment of the basic living needs.

The productivity of the worker is greatly related to the wage earned by an individual. A raise in the minimum wage will lead to an increase in the productivity of the worker and cause reductions in the employment turnover. The worker’s salary is a fundamental aspect that motivates a person to work more and in an efficient manner. Therefore, this recognizes the goals of an organization. Besides, if a firm gives a worker unsatisfactory income, it could lead to high rates of employee turnover as people will seek for better-paying jobs. Numerous economists note that a major solution in cultivating the worker’s productivity and decreasing the employee turnover includes solving the challenge relating to the minimum wage. Eyraud highlights indicating “As the minimum wage rises and work become more attractive, labor turnover rates and absenteeism tend to decline” (Eyraud 19). Similarly, Pacheco found notable evidence indicating that the employement turnover rates of the restaurant personnel decreases if their wages are increased (Pacheco 17). Furthermore, Leigh notes that increasing the minimum wage is beneficial in enhancing the customer satisfaction and therefore having a direct effect on increasing the revenues of a company.

Indeed, minimum wage raise will see greater reductions in the welfare spending of the national government. Many individuals will be eligible for funding for their own expenses and reduce the huge dependence rate on the government funds. Kukathas states that “Raising the minimum wage to $10.10 will reduce the Supplemental Nutrition Assistance Program spending by 6% and thus save 4.6 billion” (Kukathas 49). Eyraud further notes that “the increase would shave $7.6 billion of annual government spending on income-support programs” (Eyraud 14). In addition, minimum wage increase will attempt to reduce the federal deficit. The reduce dependence will reduce the federal budget and the public assistance program will be greatly curtailed. Therefore, “the reduced budget deficit will make the nation divert its revenue into other important factors that will drive the growth and development of the nation” (Kukathas 34). Certainly, the government expenditure on the programs that are directed to the low-income workers will reduce and hence become an important economic move. Many governments incur unnecessary expenditures on programs like hospital bills, nutrition and schools as the low-income earners are not able to be able to pay the expenses for themselves. Therefore, if the government aims at curtailing its expenditures, it has to embrace the policy of minimum wage increase.

The challenges of income inequalities in many nations have been among the major problems that economist aim at addressing for improving the economic performance. The gap that exists between the rich individuals and the poor is notably wide enough to raise an alarm. Leigh argues that the gap is contributed by the low minimum wage and this impacts massively to the per capita income of the country. Leigh says that “The big gap paints false result on the nation’s standard of living, as the people are likely to imagine that the country is at the better position, while the majority of the people live in poverty” (Leigh 67). The US is also faced with challenges arising from income inequalities (Economic Cooperation and Development). Thus, if the government increase the minimum wage, it will lead to reductions of the high and rampant problem of income inequality. The minimum wage raise will culminate into a ripple effect that will see an increased in the income level of persons who earn considerably above the minimum wage rate. Hence, this will not only be valuable to the 3.7 million individuals who get an income that is below $10.10 per hour but also benefits the 35 million employees who earn slightly above the minimum wage rate. This will magnificently decrease the income equalities. Kukathas reports “an increase to $10.10 per hour would raise wages for 28 million Americans–about nine million of those due to the ripple effect” (Kukathas 21). Owing to the ripple effect resulting from the wage rise, the income inequality will decrease and thus have a positive economic impact.

No one can dispute the fact that the crime rate in every nation is linked to the rate of minimum wage charged in a nation. United States Department of Labor notes a correlation between the minimum wage and the crime rate concluding that low wages fuel the crime rate of a nation. Notably, if individuals are paid wages that are too low to sustain them, many of these people will resolve into finding money through illegitimate means. The illegitimate activities include drug trafficking, burglary and any violence that will bring them an extra coin. According to Kukathas, it is reported that “higher wages for low-income individuals reduce crime by providing viable and sustainable employment” (Kukathas 21). Besides, it is asserted that when the minimum wage is raised to $12 by 2020, it will lead to reductions in the crime rate to approximately 3-5% (Leigh 41). An increase in the wage rate will thus cause crime rates to decrease.

Conclusion

Many scholars and workers from various economic spectrums are vehemently in support of increasing the minimum wage. In support of the argument, arguments hold that the minimum wage will result in the reduction of the income inequality gap, reduce the poverty rates, decrease the crime rate and also lower the rate of government expenditure. These factors are greatly responsible for the realization of the economic objectives that are stipulated in the millennium development goals. However, even though the rise in the minimum wage rate has a positive economic impact, opponents claim that the increase leads to unemployment and high rates of inflation hence noting that the minimum wage should not be increased. Nevertheless, it has to be pointed out that increase in minimum wage fosters a healthy economic growth

Annotated Bibliography

Economic Policy Institute. Minimum wage. Washington, DC. 2016. Accessed on April 21, 2017 http://www.epi.org/research/minimum-wage/

According to the Economic Policy Institute, the minimum wage is a key standard of labor that is driven at ensuring that there is a fair wage to the nation’s lowest paid employees. Under this article, the researchers of EPI examine the way minimum wage impacts to the economy and the workers. It also illustrates the benefits of raising the minimum wage, and how the decline in the minimum wage contributes to the income inequalities.

François Eyraud, Catherine Saget, International Labour Office. The Fundamentals of Minimum Wage Fixing. International Labour Organization, 2005

The book highlights that the minimum wage is a key social and economic policy tool which is both flexible and powerful in gearing economic development. The book draws a comprehensive database to the principal legal provisions and the minimum wage fixing mechanism in 100 nations. The book does shed light on the intricacies through providing an intensive overview to the practices and institutions globally. The books provide an outline to the major topics of debates that regard the effects of the minimum wage on the primary economic and social variables like wage inequalities, employment, and poverty. This book supports the idea that minimum wage is an important feature to the economic efficiency.

Kukathas, Uma. The Minimum Wage. Greenhaven Press, 2010.

The book highlights how minimum wage is a violation of liberty and workers’ rights. It also looks into the majority opinion concerning the minimum wage and the new deal policies. It also addresses the need of upholding the constitutional registrations of minimum wage and also addresses the constitutional wage inequalities of women. It supports the idea that increasing the minim wage is beneficial to the economy.

Leigh, Andrew. “Does Raising The Minimum Wage Help The Poor?” SSRN Electronic Journal, Elsevier BV, doi:10.2139/ssrn.848948.

In this journal. Leigh sets out to answer the question of if an increase in the minimum wage is beneficial to the poor people. In his findings, Leigh notes that an increase in the minimum wage benefits the poor individuals as it raises their stands of living and makes workers be able to afford the daily necessities.

Liu, Shanshan, and Thomas Hyclak. “Employment Effects of US Minimum Wage Policy”. Zarządzanie Publiczne, no. 3(33)/2015, 2015, pp. 5-15. Uniwersytet Ekonomiczny w Krakowie – Krakow University of Economics, doi:10.15678/zp.2015.33.3.01.

In this article, Liu demonstrates that increasing the minimum wage will have negative effects to the unemployment level of the country. In his journal, Liu indicates that the employers, particularly in the private organizations, will lay off some of the works along with reducing the hiring levels. He, therefore, argues that the minimum wage should not be increased as it will be damaging to the economy.

National Low Income Housing Coalition. Releases out of reach 2016. MAY 31, 2016. Accessed on April 21, 2017 from http://nlihc.org/article/nlihc-releases-out-reach-2016

This is a report documented by the National Low Income Housing Coalition indicating that the minimum wage should be increased in order to make people afford the minimum housing costs required for rental charges. It postulates that the wage should be increased to $10.10 per hour.

Patton Mike. The Facts On Increasing The Minimum Wage. Forbes Newspaper. NOV 26, 2014. Accessed on April 21, 2017 from https://www.forbes.com/sites/mikepatton/2014/11/26/the-facts-on-the-minimum-wage-increase/#3cbc0c9b33a1

This is an article from the Forbes newspaper that highlights the history of the minimum wage, debates the merits of the minimum wage and indicates the impact of the minimum wage on the economy. The article was written by Patton and contends that the minimum wage should be increased from the current $7.25 to $15. 00 for increased standards of the living.

Scheiber, Noam. Higher Minimum Wage May Have Losers. The New York Times. JAN. 10, 2017. Accessed on April 21, 2017 from https://www.nytimes.com/2017/01/10/business/economy/national-minimum-wage-.html?_r=0

In this article, Scheiber argues that raising the minimum wage is not helpful to the economy. According to Scheiber, when the minimum wage is increased, the employees will resolve into hiring personnel that previously earned higher income which corresponds to the increased valued in their search for productivity. Employers will not be willing to higher the low skilled personnel as the wages will be high to substitute them. Thus it becomes a loss to many individuals particularly the low-skilled personnel.

The Economic Cooperation and Development. Minimum Wage after Crisis. May 2015. Accessed on April 21, 2017 from http://www.oecd.org/social/Focus-on-Minimum-Wages-after-the-crisis-2015.pdf

The report featuring the wage after crisis comprehensively documents the statutory minimum wage in the OECD area indicating the widespread in some countries and how the wage is low in other countries. It also indicates the minimum wage on the employer’s costs and the role of taxes and transfers. The report also shows that tax burden is high to the lowest wage levels. Furthermore, it explains that the minimum wage and household income besides indicating the wage floor and the ceiling hours. Moreover, the report focuses on the impact of the minimum wage to the disadvantaged groups.

United States Department of Labor. Minimum Wage. 2017. Accessed on April 21, 2017 from https://www.dol.gov/general/topic/wages/minimumwage

This is a website of United States Department of Labor containing the notice of the proposed minimum wage rulemaking and review of the minimum wage. The website also gives the history of the minimum wage and highlights the state’s minimum wage. The site defines the minimum wage and stipulates what each worker should receive. It also provides the information of youth and minimum wage and facts on hours worked under the fair labor standards.

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Work Cited

Economic Policy Institute. Minimum wage. Washington, DC. 2016. Accessed on April 21, 2017 http://www.epi.org/research/minimum-wage/

François Eyraud, Catherine Saget, International Labour Office. The Fundamentals of Minimum Wage Fixing. International Labour Organization, 2005

Kukathas, Uma. The Minimum Wage. Greenhaven Press, 2010.

Leigh, Andrew. “Does Raising The Minimum Wage Help The Poor?” SSRN Electronic Journal, Elsevier BV, doi:10.2139/ssrn.848948.

Liu, Shanshan, and Thomas Hyclak. “Employment Effects of US Minimum Wage Policy”. Zarządzanie Publiczne, no. 3(33)/2015, 2015, pp. 5-15. Uniwersytet Ekonomiczny w Krakowie – Krakow University of Economics, doi:10.15678/zp.2015.33.3.01.

National Low Income Housing Coalition. Releases out of reach 2016. MAY 31, 2016. Accessed on April 21, 2017 from http://nlihc.org/article/nlihc-releases-out-reach-2016

Patton Mike. The Facts On Increasing The Minimum Wage. Forbes Newspaper. NOV 26, 2014. Accessed on April 21, 2017 from https://www.forbes.com/sites/mikepatton/2014/11/26/the-facts-on-the-minimum-wage-increase/#3cbc0c9b33a1

Scheiber, Noam. Higher Minimum Wage May Have Losers. The New York Times. JAN. 10, 2017. Accessed on April 21, 2017 from https://www.nytimes.com/2017/01/10/business/economy/national-minimum-wage-.html?_r=0

The Economic Cooperation and Development. Minimum Wage after Crisis. May 2015. Accessed on April 21, 2017 from http://www.oecd.org/social/Focus-on-Minimum-Wages-after-the-crisis-2015.pdf

United States Department of Labor. Minimum Wage. 2017. Accessed on April 21, 2017 from https://www.dol.gov/general/topic/wages/minimumwage

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