The Minimum-Wage Increase Controversy, Essay Example

Minimum wage increases may negatively impact some low-skilled laborers’ prospects by risking their employment statuses. The issue in question is whether or not the negative impacts of increased minimum-wage rates can be overlooked. The most important factors to be examined in this decision include employees’ ability to pay, the demand for output, the worker’s productivity, and overall economic benefit. These factors are the most important to consider because they hold a significant bearing on the overall benefits accrued to the employees and the employers. For instance, if the demand, employee productivity, and employees’ paying ability are high, an increase in minimum wages is likely to be beneficial.

Some economists argue that no correlation between unemployment rates and minimum wage bumps exist. In such a case, the bump may be considered a worthy price to be paid. For instance, Krueger and Card’s Princeton study indicated a positive correlation between employment and raised minimum wage rates. Furthermore, these economists claim that apart from raised employment rates, increased wage rates could benefit the nation’s economy since these laborers tend to spend their additional income, which stimulates job growth in other sectors and raises demand. On the other hand, adversary economists draw lines between increased compression of wages and increased minimum wages. They claim that apart from job losses for some of these workers, bumped low-skill wages will force employers also to raise wages for high-skilled laborers to ensure differentiated pay (Truhlar, 2018). Overall, they argue that the prior adverse effects suggested by previous research pieces are understatements.

From a positive perspective, increased wage rates are beneficial to most low-skilled laborers. This perspective goes against the usual perception that increased minimum wage rates have various repercussions. While the normal perspective uses the law of demand, the positive approach uses the law of supply. The law of supply postulates that increased minimum wages, that is, higher labor prices, result in a high labor supply. This theory is mostly beneficial to businesses that require a high number of low-skilled laborers to enhance their overall productivity. Furthermore, increased wages would boost the worker’s productivity level and turnover due to increased worker morale. The law of demand implies that higher labor market prices result in decreased labor demand while lower salaries increase labor demand (OpenStax, 2016).  Essentially, these perspectives are contradictory.

However, both sides make assumptions in their arguments. The economists that argue that increased wage rates do not necessarily reduce labor demand assume that most businesses need a certain number of employees to maximize their output and are unwilling to compromise on losing these low-skilled laborers just because of increased wage rates. On the other hand, those who argue that most low-skilled laborers may lose their jobs due to increased minimum wage rates base their arguments on assuming that most businesses will be unable or unwilling to pay these wages to employees. Thus, they will need to cut down on their low-skilled employee population. Nevertheless, evidence on the second assumption is subject to bias since they fail to consider the importance of achieving an equilibrium in the labor market that ensures maximum output.

I support the policy proposal on raising the minimum wage nationwide to $15. I believe that the benefit accrued by these low-skilled laborers due to increased wages are more worthy considerations than the possibility of them losing their jobs. Furthermore, I believe that most employers can increase their wages to these workers to sustain higher productivity levels, contributing to overall business success. If questioned on this proposal by a friend, I would respond by asking them to look at the proposal from the minimum-wage earner, business, and economical perspectives. In doing so, they will support the notion that raised national minimum wages help these employees cope with the nation’s increased living costs. Other than that, it stimulates consumer spending, which in turn helps the businesses’ lowermost lines. Ultimately, it grows the nation’s overall economy.

References

Houston, W. W. (2013, February 27). The law of demand is a bummer. The Economist. https://www.economist.com/democracy-in-america/2013/02/27/the-law-of-demand-is-a-bummer

OpenStax. (2016). Labor and Financial Markets. In Principle of Economics (pp. 41-42). OpenStax Economics.

Truhlar, J. (2018, August 6). How Do Minimum Wage Increases Affect Financial Employees and Unemployment? BalancedComp. https://balancedcomp.com/how-do-minimum-wage-increases-affect-financial-employees-and-unemployment/