The issue of raising the minimum wage is a highly debated topic in the current era. While those supporting the idea are claiming that it will improve the lives of workers, the opponents believe that it will have negative implications for the economy. In this regard, increasing the minimum wage is associated with both advantages and disadvantages.
Pros
Raising the minimum wage will improve the standards of living of the lower-income earners. They will be having more money to spend, thereby living a better quality of life. Moreover, raising the minimum wage will counter a country’s inflation rate. Notably, the minimum wage is not updated with the economic progress of a country, and workers never earn enough to cater for their needs. Therefore, an increment in the minimum wage will counter the erosion of wages as a result of inflation (Neumark, Salas, " Wascher, 2014). Finally, an increase in minimum wage will boost the economy. Workers will be having more money, increase their expenditure, which in turn, will promote the economic growth of a country.
Cons
As a disadvantage, an increase in minimum wage will raise unemployment rates in a given country. If firms are forced to pay workers more than the current wages, they are likely to lay off some workers. This will increase the unemployment rates and job competition. Further, an increase in minimum wage will reduce business profits. Firms will be incurring higher labor costs, which will reduce their returns. They may respond to the higher costs by increasing the prices of goods, a move that may trigger inflation. Finally, increasing the minimum wage can encourage highs-school dropouts, as the higher pay may attract teenagers making them do away with school (Giuliano, 2013). They will consider schooling as a waste of time because they will be making good money through working, which will affect the job market in the future.
References
Giuliano, L. (2013). Minimum wage effects on employment, substitution, and the teenage labor supply: Evidence from personnel data. Journal of Labor Economics, 31(1), 155-194.
Neumark, D., Salas, J. I., " Wascher, W. (2014). More on recent evidence on the effects of minimum wages in the United States. Journal of Labor policy, 3(1), 24.
