The US government seems convinced that the minimum wage law is the tool that will help improve the welfare of workers and alleviate poverty in the country. National political leaders have been asking for the federal minimum wage to be increased to $10.10 per hour. On January 1, 2015, the government implemented this minimum wage increase for employees of federal contractors. Many see this government action as evidence that the Obama administration is strongly interested in raising minimum wages generally. However, this law is one of the most contentious economic issues in the country. Debates exist about whether it is necessary and if so, at what level it should be set. Opponents of the minimum wage argue that this proposal has not considered the impact that such a minimum wage level would have on the labor markets in the country. On the other hand, proponents argue that the minimum wage should be set even higher to ensure that workers earn enough to manage a decent living. This paper will argue that instead of raising the minimum wage, the government should remove the minimum wage. It will show that the existence of the minimum wage is detrimental to the economic well-being of workers and the country as a whole.
The minimum wage should be eliminated since it results in job loss in the country. The common motivation of all businesses is to make a profit. This can be achieved by increasing productivity and decreasing production costs. When the government imposes minimum wages, some companies are unable to afford the increased expenses in wages. Gorry and Nataraj document that the proposed $10.10 per hour minimum wage would lead to the loss of half a million jobs in the US (par. 1). This loss would occur as companies reduced their staff in order to afford the wage increase on the remaining members of staff. Other companies would also choose to invest in machines that can carry out the jobs done by the low-skilled workers. Goldberg reports that restaurants have already started investing in machines to reduce the need for human labor (par.2). Such responses to the minimum wage only increase the job loss problem. According to Veuger, the minimum wage increases experienced in the US since the late 2000s have contributed to the loss of about 1.4 million jobs (par.7). This is a staggering figure considering the fact that the country is trying to decrease its unemployment levels by increasing the number of new jobs. The government should do away with the minimum wage laws that have so far contributed to the loss of job opportunities for the country’s workforce.
The minimum wage laws damage the economy by forcing many businesses to close down. Some businesses are labor-intensive and the input of workers is essential to the running of the business. When the government imposes minimum wages, the businesses are forced to increase the payment made to the workers or face legal action. Perry explains that for some businesses, the minimum wage is too high and they are forced to close down since they are no longer profitable (par. 1). Businesses that rely heavily on human labor while at the same time enjoying only modest profit margins are unable to cope with even modest increases in the minimum wage. Small businesses make a considerable contribution to the overall US economy. The closing down of these businesses due to increased labor costs is therefore unjustifiable. From this perspective, minimum wage laws are destructive wage policies that damage the country’s economy. They should be done away with to ensure that the country enjoyed economic growth and prosperity.
In addition to this, the minimum wage laws should be eliminated since they do not consider the different costs of living in various regions all over the US. The cost of living varies across the country with highly urbanized regions having high costs while rural regions have a relatively lower cost. Imposing a national minimum wage, therefore, benefits workers from the low cost of living regions while it largely disadvantages the ones who live and work in regions with higher costs of living. Biggs explains that the differences in average wages between regions are attributed to the unique economic situations in the regions (par.2). For example, average wages in Manhattan are higher than those in Birmingham since the cost of living in Manhattan is about 2.5 times greater than that of Birmingham. Minimum wage laws would force employers in both regions to pay workers uniformly. The laws would be damaging since they do not consider the quality of life that workers face at different places in the country. Biggs observes that the United States is a vast country with diverse economic realities in different regions (par. 5). The government should therefore abolish the minimum wage laws and let the employers and employees who know the living cost of their unique regions negotiate for the appropriate wages.
Proponents of the minimum wage argue that it is a necessary tool to ensure that low-skilled workers are not exploited by their employers in the country. This argument is based on the understanding that the lower-skilled workers are paid the lowest wages since their occupations do not require highly specialized skills. McCloskey (par. 3). In addition to this, the number of low-skilled workers is high leading to high competition for the limited number of jobs. By having a minimum wage, employers are forced to pay their workers a certain legally mandated minimum pay. This argument has some merit since some employers might pay their workers poor wages in order to increase the profits. However, employees do not need the minimum wage law to avoid exploitation. Workers can join workers’ unions that ensure that they are paid decent wages in their work place. These unions are able to successfully negotiate with employers using collective bargaining as leverage. In addition to this, employers are forced to provide good wages or risk losing their best workers. Competitive forces in the market ensure that employers maintain a good wage in order to attract and maintain their best workers. The minimum wage law is therefore not necessary since workers can make use of other avenues to avoid exploitation.
Proponents of a minimum wage declare that it can be used to raise hundreds of thousands of people from poverty. Some of the Americans who earn at or below the minimum wage are unable to maintain a decent living due to the high cost of living. By using the minimum wage law, the government can dictate the minimum hourly wage that these people can earn. If this minimum wage is high enough, the workers will be lifted out of poverty. The Congressional Budget Office estimates that the proposed $10.10 minimum wage would lift about a million Americans from poverty (Gorry and Nataraj par. 1). While the minimum wage raises the low wage workers out of poverty, it keeps many more in poverty by preventing them from acquiring the necessary skills through the low pay entry jobs. Many workers earning the minimum wage or below are young people who are gaining the experience necessary to move to higher-paying jobs. The minimum wage laws prevent these workers from getting into entry level jobs and gaining the necessary experience. They are therefore likely to stay in poverty longer than they would have if the minimum wage did not exist. In addition to this, research shows that there is no correlation between the minimum wage and poverty reduction. Ponnuru declares that the minimum wage is not a tool against poverty since the poverty level in America has not reduced following the increases in the minimum wage over the past decade (par. 3). The minimum wage policies should therefore be abolished since they do not contribute to overall poverty alleviation in the country.
The minimum wage is still regarded as an important tool for protecting employers and alleviating povert the US policymakers. This paper set out to show that minimum wage laws are actually damaging to the economic well being of individuals and the country and as such, they should be removed. These laws lead to job losses and force many businesses to close down due to increased labor costs. The paper has also noted that the laws fail to consider the varying costs of living across different regions in the country. President Obama has endorsed the proposed $10.10 minimum wage in America. While this wage increase appears to be beneficial, it will in fact have dire economic consequences for workers and the country as a whole. All development minded citizens should therefore petition for the abolition of the damaging minimum wage laws all over the United States.
Biggs, Andrew. One size fits none: Why a national minimum wage makes no sense. 2014. Web.
Goldberg, Jonah. The minimum wage and the rise of the machines. 2013. Web.
Gorry, Aspen and Sita Nataraj. Minimum wage, maximum harm. 2014. Web.
McCloskey, Abby. Minimum wage, minimal benefits. 2014. Web.
Perry, Mark. Seattle’s new minimum wage law takes effect April 1 but is already leading to restaurant closings and job losses. 2015. Web.
Ponnuru, Ramesh. Raising the minimum wage is still a bad idea. 2014. Web.
Veuger, Stan. How the minimum wage destroyed 1.4 million jobs. 2014. Web.