Essay Example: Raising the Minimum Wage

The federal minimum wage value has dropped by 24 percent in the previous five decades (the United States. Cong. S. Committee on Education & Workforce Democrats 1). The current federal minimum wage of $7.25 means that an adult with two children is several thousand dollars below the national threshold of poverty (the United States. Cong.S. Committee on Education & Workforce Democrats 1). Minimum wages need to be periodically adjusted because it is an essential determiner of the quality of life enjoyed by most of the population. Adjusting the minimum wage minimizes relative deprivation that can be caused by inflation. That is an issue that everyone should be concerned about because of its impact on the country's overall economy. Raising the minimum wage is good for economic growth because it assists businesses' bottom line and increased consumer spending.

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Background

Many countries started establishing and strengthening the idea of minimum wage beginning the 1990s. According to A Short History, many developed and emerging economies set a minimum wage, beginning the mid-1990s (par.7). In the United States, the last time the minimum wage was revised to 7.25 an hour was slightly more than ten years ago (Tedeschi par.1). Since then, the rate has remained stagnant, which has led to some calls by sections of the political class and the public to increase the minimum wage to conform to inflation levels. In 2015, Robert Scott, the House Representative for Virginia's 3rd Congressional District, introduced the H.R. 2150 (114th): Raise the Wage Act. However, the bill failed to receive enough support and could not be enacted by the end of Congress, causing it to be cleared from the books (H.R 2150-114th Congress). The bill was supposed to increase the federal minimum wage to $ 12 per hour by 2020 (United States Cong. 1). In 2016, the States of California and New York passed legislation that increased the minimum wage to $ 15 an hour (Kiger par.22). As of 2019, Washington D.C and 29 States were maintaining a minimum wage higher than the one set by the federal government, and eight states automatically raised the minimum wage as per the cost of living (Kiger par.23). Based on various countries' actions across America, it is a clear indication that there is a need for the federal government to raise the minimum wage to conform with the increased cost of living and inflation rates.

Confirmation of Argument

The general assumption associated with the positive impact of raising the minimum wage is that it increases the majority of the population's spending power. Having a high-income society is one of the remedies for having a prosperous society. High wages give the general population high spending capability, which translates to a better business environment because of the high demand for goods and services. It shows that prosperity doesn't need to come at the expense of those at the bottom of society.

There is considerable evidence that an increase in minimum wage boosts the economy. Raising the minimum wage would "generate a positive impact on GDP and related modest employment growth" because the low-income workers would immediately spend their increased income (Hall and David 1). According to Hall and David, a $ 2.55 increase in the minimum wage would create a $ 40 billion rise in the low-income workers (Hall and David 2). That clearly shows that the raising of minimum wages is not just good for individuals but also for the whole country.

The goodness of increasing the minimum wage ensures everyone in the society can afford to meet their basic needs regardless of their social status. The minimum wage was designed to provide everyone lives above the poverty line, and the failure to adjust the minimum wage means that more people fall below the poverty line every year. But the evidence from above has indicated that that need not be the case, and there are no long-term benefits in prospering off others' demise in society.

Refutation

One of the main objections to raising the minimum wage is that it is terrible for employment because it would force businesses to lay off some employees to prevent insolvency. However, Schmitt demonstrates that “raising the minimum wage has no discernible impact on employment" (22). The impact of the minimum wage increase makes up for a small percentage of the overall costs of doing business and only modestly relative to the wages paid (Schmitt 22). Also, companies have several other avenues to compensate for the increase. One of the routes that can be exploited is the reduction in the number of working hours. According to Schmitt, even if firms are to reduce the number of hours without accompanying any other adjustment channel, a minimum wage increase would still alleviate living standards for the minimum wage workers (15). Different possible ways for compensating for the adjustment would be reducing the non-wage benefits such as pension contributions or health insurance.

Another objection is that raising the minimum wage would result in increased living costs as a business would carry forward the cost of increased wages to the consumers. However, such an objection is wrong because, as it has already been demonstrated, companies have many avenues to make up for the added costs (Schmitt 15-21). The price increase would be the last resort because of the competition. Increasing the price of goods or services may give their competitors an advantage, and they would only consider it if no other option is available. However, should businesses decide to pursue price increase to make up for the increased wage, then the price increases would not be more than the wage increase. (Schmitt 18).

The third objection raised against wage increases is that it would cause corporations to outsource some or all of their labor to countries with low or non-existent minimum wages. However, both United States Cong and Schmitt indicate that raising the minimum wage would increase productivity, making it more efficient to produce a good or service within the U.S compared to some other country with a lower minimum wage (1; 18-9). The increased productivity from the labor force would discourage the companies from moving to other countries because they are unlikely to find such an efficient environment and workforce.

Conclusion

The logic behind raising the minimum wage is to increase the spending power of the low-income earners. But having a high minimum wage does carry a fair share of advantages to society as a whole. The first benefit is that it stimulates consumer spending due to the increased spending capacity of low-income earners. The second benefit is that it increases companies' profitability because of the increased number of people who can afford to purchase their products and services. Finally, raising the minimum wage also reduces the country's overall poverty levels, enabling everyone to have access to basic needs such as food, shelter, and clothing. Therefore, policymakers and other stakeholders must pursue an increase in the federal minimum wage to obtain such benefits.

Works Cited

"H.R. 2150 — 114th Congress: Raise the Wage Act." www.GovTrack.us. 2015. September 13, 2020, <https://www.govtrack.us/congress/bills/114/hr2150>

A Short History. International Labor Organization, 2020, https://www.ilo.org/global/topics/wages/minimum-wages/definition/WCMS_439071/lang--en/index.htm#:~:text=Minimum%20wages%20were%20first%20introduced,only%20to%20women%20and%20children.&text=In%201938%2C%20following%20an%20initiative,instituted%20a%20federal%20minimum%20wage.. Accessed 13 Sept 2020.

Hall, Doug, and David Cooper. "How raising the federal minimum wage would help working families and give the economy a boost." Issue Brief 341, (2012).

Kiger, J. Patrick. “Minimum Wage in America: A Timeline.” History, https://www.history.com/news/minimum-wage-america-timeline. Accessed 13 Sept 2020.

Schmitt, John. Why does the minimum wage have no discernible effect on employment?. Vol. 4. Washington, DC: Center for Economic and Policy Research, 2013.

Tedeschi, Ernie. “Americans are Seeing Highest Minimum Wage in History (Without Federal Help).” The New York Times, 24 April. 2019, https://www.nytimes.com/2019/04/24/upshot/why-america-may-already-have-its-highest-minimum-wage.html. Accessed 13 Sept 2020

United States. Cong. S. Committee on Education & Workforce Democrats. Raising the Minimum Wage: Good for Workers, Businesses, and the Economy., first sess. Washington: GPO, 2017.