Changing the federal minimum wage has been a notorious economic topic of discussion across the globe for several years now. There are people who constantly argue that the federal minimum wage should be raised while others argue that it should not be increased because of the effects this can have on the workers and on the economy. The federal minimum wage is the lowest amount of wage that employers are required to be pay to workers. Despite the different arguments on the topic, it is important to note that raising the minimum wage will help in improving the economy.
Raising the federal minimum wage can be of great benefit to millions of workers across the United States. According to Cengiz et al., when the minimum wage is increased, the living standards of the poor American workers will improve (2018). The cost of living in the United States is considerably high and this means most workers from low-income families are struggling to make ends meet. Life has become more expensive for workers with the current minimum wage making them unable to support their families. Many of them are struggling with the cost of living, the cost of education, and even health costs whereby it is mandatory for them to pay for health insurance. As a result, it has become an uphill task for average workers or rather low-income earners with the minimum wage to make ends meet since their expenses have surpassed their wages. However, with an increase to the minimum wage, it means that their living standards will be improved because they will now be able to afford essential basic needs, which have been a struggle for them. Changing the minimum wage will help improve the living standards of low-income earners by lifting them out of poverty.
A change to the minimum wage can lead to an increase in productivity by the employees. With higher wages, employees will be psyched up to improve their performance at work. A change to the minimum wage can increase the incentive for workers to work harder and this will increase labor productivity in businesses and firms (Meer " West, 2016). In contrast, a change to the minimum wage might lead to businesses and firms focusing on the profit margins other than the welfare of the workers. Most businesses are always concerned with the profit margins other than the safety of their workers. Therefore, even though raising the minimum wage can lead to an increase in production, it can be willingly from the works or through force and overworking from companies that are more focused on profit margins.
Raising the minimum wage will lead to a rise in salaries of the several American workers. Employees greatly benefit from the changes in the minimum wage. Currently, Dettling and Hsu document that several workers are in debts because of the minimum wage that barely supports them (2017). According to Dettling and Hsu, if the minimum wage is increased, it will help those with loans to clear their debts something that has been impossible for many people with the current minimum wage (2017). These workers have incurred these debts due to the high living standards and when banks have several debtors; this can adversely affect the economy. Therefore raising the minimum wage will increase salaries, help debtors pay their loans and improve their living standards.
Changing the minimum wage will help boost the economy. Increasing the minimum wage means, more money will be remitted to the government due to increased employment rates. It also means that the low-earning workers who depend on the government will have enough money in their pockets thus a reduction in government spending on social programs that support the poor and this is a benefit to the economy. In addition, raising the minimum will lead to an increase in employees and since there will be more earning, there will be reduced turnover as the economy gains and this is a great improvement to the economy (Lordan " Neumark, 2018).
The problem of the federal minimum wage has led to class disparities across the United States. Hence increasing it will help reduce the gap between the rich and poor because at least all citizens will now afford most of the basic amenities that they are currently struggling to have. Additionally, Schmitt writes that with an increased minimum wage, the low-income earners will be able to survive during harsh economic crises since they will not need help from the government’s social programs (2015). Therefore, changing the minimum wage will greatly benefit the low-income learners who will now have enough money on their pockets to meet their basic need and this means there will be more spending and a plus to the economy.
Despite the advantages, changing the minimum wage has its shortcomings too because they can hurt the same group the policymakers claim it would help. For instance, raising the minimum wage might lead to an elastic demand for labor. There will be an increase in unemployment rates since many employers will lay off several workers and this will hurt both the workers and the economy. Due to an increase in technology, many companies have opted to turn to machines in their production and manufacturing industries with a few workers. Therefore, increasing the federal minimum wage might force the company owners to opt to use machines in their production work and lay off several workers to avoid paying more and this is detrimental to the employees in the long run (Lordan " Neumark, 2018).
In addition, employers who depend on human labor may resolve to invest in automated machines and technology to evade the use of human labor if the minimum wage is increased meaning more people will be left without jobs thus putting them back into poverty. An increase in the cost of labor might force businesses and companies to reduce their staff, meaning fewer job opportunities and increased unemployment. Furthermore, Hardy, Smeeding and Ziliak, add that most employers will introduce labor-saving capital investments and replace unskilled workers with skilled workers meaning few jobs for unskilled workers thus higher unemployment rates (2018). Therefore, despite having its advantages, raising the minimum wage might lead to high unemployment rates and since the economy depends mostly on taxes, due to reduced taxes brought about by job losses, the economy will be adversely hurt.
In addition, changing the minimum wage will lead to low college completion rates. Many young people will opt to work instead of going through with their college education because of the wages. In the US, many high school and college students do work as part-time to make some dollars for their college fee and even for their own upkeep. If the wages are increased, it is probable that these young people will not see the need for continuing with their studies if they can work and are paid well (Neumark " Wascher, 2015). Therefore, before changing the minimum wage, this should be put into consideration to protect the young people from making the wrong life decisions of choosing work other than studying. While it is true that young employees can benefit from the changes in the minimum wage but it can also be detrimental to them in the long run as well.
Raising the minimum wage can lead to an increase in the living standards of the poor households and this will greatly affect the low-income earners. Most low-income families are trying their best to keep their families above the poverty line but if these wages are raised, it means the living standards will go up too Hardy, Smeeding, " Ziliak, 2018). While everyone might argue that raising the minimum wage is the best way to alleviate poverty, this might not be the case because it will make the lives of these low-skilled workers impossible. According to Sorkin, increasing the minimum wage does not decrease poverty but rather increases the poverty rates (2015). The only way to decrease poverty rates is to allow economic freedom whereby employees have diverse choices to choose from and to get hired under their own terms and conditions and not under the terms dictated by the federal government.
Changing the minimum wage can lead to a lack of competition in firms and businesses. To some extent, an increase in the minimum wage could push up costs in businesses making them go out of business because they might fail to afford the wage costs (Antonczyk, DeLeire, and Fitzenberger, 2018). For instance, if a firm is competing in the global markets, an increase in the minimum wage will make them uncompetitive to countries where there are low wages. Technically, if a company is manufacturing maybe phones in the UK and competing globally, then the minimum wage is increased in such a country, it will lose its competitiveness because of higher costs since the firms buying from this company will find phones that are cheaper from other countries. Moreover, a change to the minimum wage can lead to cost-push inflation because of an increase in costs for the firm, which will definitely be passed to the consumers. An increase to the minimum wage changes the equilibrium quantity and price in global markets for the output the changed minimum workers are producing. Since the input prices are a determinant of the supply, it is automatic that a change to the minimum wage will alter the supply curve with the amount of the increased wages in the markets where the employees are affected by the changes to the minimum wage. Therefore, a change to the minimum wage can adversely affect not only workers but also businesses and firms because it will lead to higher costs and this can make them uncompetitive.
On the other hand, if the minimum wage is not changed, this might lead to an increase in college dropouts or even low college admission turnouts. Many people attend colleges so that they can get the best jobs available in the markets with the best pays. Therefore, if the minimum wage is not increased, many youths will not attend college because they will not see the need for wasting their years in college yet the federal minimum pay is low.
Different people have had varying arguments and proposals on the topic of changing the federal minimum wage. Some people advocate for changes in the minimum wage whereby they argue that is should be increased while others argue that it should remain the same. However, it is important to note that increasing the minimum wage is one of the best ways to improve the economy. Therefore, everyone should advocate for an increase in the federal minimum wage because of its economic benefit. With an increased minimum wage, the living standards will improve because most low-class Americans will be lifted out of poverty Clemens " Strain, (2017). In addition, raising the minimum wage will increase employment rates meaning more taxes to the government. Many people have remained unemployed due to the federal minimum wage, Therefore, if increased, many people will seek employment, and the state will get more taxes, which is beneficial to the economy.
In conclusion, due to an increase in the cost of living, there have been several debates on changing the federal minimum wage. There are those supporting an increase to the minimum wage while others opposing the move claiming that it will hurt the economy. Several people are living below the poverty line due to the set federal minimum wage forcing them to seek support and funds from the government. Besides, many qualified personnel are out of jobs due to the set federal minimum wage and this is crashing the economy even more. Nonetheless, with the rise of the minimum wage, the living standards will be improved; there will be a reduction in poverty, an increase in employment rates thus an improved economy. It is true that raising the minimum wage might lead to loss of jobs and low college completion rates but again, the advantages outweigh the disadvantages. The federal minimum wage should be raised because it is beneficial to both the people and the economy.
References
Antonczyk, D., DeLeire, T., " Fitzenberger, B. (2018). Polarization and Rising Wage Inequality: Comparing the US and Germany. Econometrics, 6(2), 20.
Cengiz, D., Dube, A., Lindner, A., " Zipperer, B. (2018). The Effect of Minimum Wages on Low-wage Jobs: Evidence from the United States using a Bunching Estimator.
Clemens, J., " Strain, M. R. (2017). Estimating the Employment Effects of Recent Minimum Wage Changes: Early Evidence, an Interpretative Framework, and a Pre-Commitment to Future Analysis (No. w23084). National Bureau of Economic Research.
Dettling, L. J., " Hsu, J. W. (2017). Minimum Wages and Consumer Credit: Impacts on Access to Credit and Traditional and High-cost Borrowing.
Hardy, B., Smeeding, T., " Ziliak, J. P. (2018). The Changing Safety Net for Low-Income Parents and Their Children: Structural or Cyclical Changes in Income Support Policy?. Demography, 55(1), 189-221.
Lordan, G., " Neumark, D. (2018). People versus Machines: The Impact of Minimum Wages on Automatable Jobs. Labor Economics, 52, 40-53.
Meer, J., " West, J. (2016). Effects of the Minimum Wage on Employment Dynamics. Journal of Human Resources, 51(2), 500-522.
Neumark, D., " Wascher, W. (2015). The Effects of Minimum Wages on Employment. FRBSF Economic Letter, 2015, 37.
Schmitt, J. (2015). "Explaining the Small Employment Effects of the Minimum Wage in the United States." Industrial Relations: A Journal of Economy and Society, 54(4), 547-581.
Sorkin, I. (2015). Are there Long-run Effects of the Minimum Wage?. Review of Economic Dynamics, 18(2), 306-333.
