Minimum Wage Essay Samples

Published: 2018-05-08
Minimum Wage Essay Samples
Type of paper:  Essay
Categories:  Minimum wage
Pages: 5
Wordcount: 1218 words
11 min read

Minimum wage definition

The definition of minimum wage is the the lowest hourly, daily or monthly salary that an employer may legally pay to his or her employees. Minimum wage is the lowest amount at which workers may sell their services or goods which in term is known as the market floor for wage.

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The various benefits of minimum wage include

Reduce poverty

Introduction of the minimum wage leads to reduced poverty levels in a country. Introduction of minimum wage raises the bottom amount of salary for workers; which increases their income level and thus have more spending ability. When the income level increase, workers will be able to spend more money for goods.

Increase productivity

Workers productivity is increased by implementation of minimum wage. This is in relation to the efficient wage theory that states higher wages will motivate workers to work harder and thus increasing labour productivity. Workers that are paid a higher amount will feel motivated to work and perform better in fear of losing the job.

Increase incentives

The minimum wage will be an additional incentive for the unemployed to find and accept a job. As the minimum wage will increase the difference between benefits from employment, it will help to increase the participation rate of employment. It will also encourage people to earn money legally and join the workforce as the minimum income is guaranteed.

Increase consumption

Minimum wage will increase the spending capability of workers which will increase the consumption level. As the low-income group of workers will have more money to spend on goods, they will spend more and increase the consumption in the country which will help the economy of the country

Decrease government spending

Minimum wage affects government spending as it decreases government cost towards social welfare programs. Workers that get minimum salaries will be able to provide for their own needs and depend less on government aids. Government will be able to cut down on social spending and use the money for investment.

Increased Investment.

Firms will have an increase incentive to invest and increase labour productivity because labour is more costly.

Counterbalance the effect of Monopsony employers.

If firms have Monopsony power they can drive wages down by employing less workers. However, minimum wages will make this more difficult. Therefore a minimum wage could have a positive effect on employment.

Certain government implementations are done without serious consideration on what will be the effects to the consuming public. Implementation of minimum wages may come with cost push inflation. This is experienced because firms have increased costs and these are mostly passed on to the consumers. This is something that is even more likely where wage differentials have been maintained. Black markets are not healthy for any economy. The moment minimum wages are increased; people who are laid-off as a consequence may turn to the black market for their survival if this is their only option.

Minimum wages rarely increase the income of lowest paid workers. This is so because the lowest income group workers or those poorest in a population normally rely on benefits in the employment and thus the minimum wage implementation may not affect them. Most of those people benefiting via minimum wage implementation are only the second income earners. Thus such households are rarely going to find themselves below federal poverty line. This translates that households with single income earners above federal minimum wage most likely are relatively poorer.


1. UKEssays. November 2013. Effects And Benefits Of Minimum Wage Economics Essay. [online]. Available from: [Accessed 9 April 2018].

The benefits of minimum wage

Minimum wage refers to the lowest wage allowed by the federal and state labor laws (David, Manning and Smith, 2016). The wage is important because it applies to the unskilled as well as semi-skilled workers in service industries and manufacturing plants. Wage is a factor of production and is determined through the interaction of the forces in the market like demand and supply. For instance, when the minimum wage is increased in the existing production levels, the demand for goods and services rises due to various reasons.

The minimum wage has many benefits. For instance, it reduces poverty. The wages of lowly paid employees can be increased by imposing minimum wages. Increasing the income of such workers leads to the reduction of their poverty levels and improves their lives. Various studies have shown how moderately increasing the minimum wage has no effect on employment (Meer and West, 2015). Legislation of minimum wage has helped in increasing the productivity of industries across the globe. For instance, with higher wages in a state or country, the employees become motivated to work to increase the productivity rates.

It is also important on the employee’s perspectives because it counterbalances the effects that arise due to monopsony employers. Monopsony employers drive their employees’ wages down by employing of few workers. This is however difficult in industries that have enacted the minimum wage legislation. Minimum wage, therefore, protects employees from being manipulated by monopsony employers. Also, it generates additional incentive mostly for the unemployed to accept or find employment (Smith, 2015). Minimum wage usually increases the difference between benefits from the employment. It, therefore, helps the individual to increase their participation rates in their work. Further, minimum wage encourages individuals to earn legally as well as join workforce because of the guaranteed minimum income.

Further, the minimum wage is beneficial because it increases the spending capabilities of employees that will increase the levels of consumption. As the low-income group of workers will have more money to spend on goods, they will spend more and increase the consumption in the country which will help the economy of the country. This also influence government spending as it diminishes government cost towards social welfare programs. Laborers that get least pay rates will have the capacity to accommodate their own needs and depend less on government aids (Neumark, Salas and Wascher, 2014). The government will be able to cut down on social spending and use the money for investment.

In summary, the minimum wage has various advantage to the nation. It fortifies the financial development of a country by expanding their utilization. It, along these lines, enhances the personal satisfaction of low-pay specialists relying upon the structure of the work showcase. The higher increment causes joblessness. The steady increment of the lowest pay permitted by law guarantees the strength of the economy as the rate of business and assessments will increment step by step. Thusly, the continuous increment in the lowest pay permitted by law does not cause enormous joblessness rate or over swelling. Adjusting the lowest pay permitted by law levels, in this manner, helps in invigorating the monetary development and the welfare of life.


David, H., Manning, A., & Smith, C. L. (2016). The contribution of the minimum wage to US wage inequality over three decades: a reassessment. American Economic Journal: Applied Economics, 8(1), 58-99.

Meer, J., & West, J. (2015). Effects of the minimum wage on employment dynamics. Journal of Human Resources.

Neumark, D., Salas, J. I., & Wascher, W. (2014). Revisiting the Minimum Wage—Employment Debate: Throwing Out the Baby with the Bathwater?. ILR Review, 67(3_suppl), 608-648.

Smith, L. (2015). Reforming the minimum wage: Toward a psychological perspective. American Psychologist, 70(6), 557.

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