Minimum wage requirements in the United States are set by USA labour law in some states, state law in others and local law in other states that have no pre-emption laws in place to prevent local governments from setting their own laws. (Bradley, 2016). The question of minimum wage has been a subject of intense economic, legal and political discourse over many years. With the influence of this discourse being seen in the fluctuation in the value of minimum wage with the highest value being in 1968 at $1.60 currently valued as $11.65. This discourse has been fostered by the disparity in research providing insight to the effect of minimum wage increase on fundamental issues such as employment, price of goods and services, poverty, crime and economic growth. In this paper, an attempt will be made to argue in favour of an increase in minimum wage by citing economic research over the past five years. The issues briefly mentioned above will be discussed and the positive implication of a raise in minimum wage on them will be explored. An argument will be made to undercount the opinions of neoclassical economists and to emphasize the plight of the low income earner.
The payment of wages that do not allow the workers to afford the necessities of life that do not consider the increase in the cost of living, that have declined in value since the 60’s is beyond unfair to the marginalized worker the scope and no business that depends on this for continual existence has any right to operate (Tritch, 2014). Payment of these poor wages erodes the purchasing power of the earner and impacts negatively on economic growth as research by the Congressional Budget Office has shown. A shift of income from high income earners who have a tendency to save more to low income earners who tend to spend more will lead to a positive increase in the GDP. However, an increase in minimum wage according to this research will leads to lower income for business owners that depend on profit and low cost of labor to make profits and the influence of this on the public support for an increase in minimum wage can be seen as African Americans, Latino Americans and Asian Americans give more support as opposed to Caucasians that constitute the greater percentage of high income earners. (DeSilver, 2017).
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The effect of an increase in minimum wage on employment levels has been the subject of a variety of contradicting research proposals as economists seem to have divergent opinions. Neoclassic economists seem to be of the view that an increase in minimum wage will lead to a decrease in employment opportunity as the increase in the cost of labour will lead to lower demand hence a reduction in employment. In contrast, economists like David Cooper have postulated that an increase in minimum wage will lead to an increase in employment and would have created 85,000 jobs in the 80’s. This has also been proven by a report by the CEPR in 2014 that seemed to find no correlation between minimum wage and unemployment. Other contrasting views are expressed in a survey done by Fowler Smith (2015). The survey concluded that there would be negative effects on youth employment, adult employment and the flourishing of small businesses if minimum wage was to be raised to the desired $15 in every state. However, as stated earlier and as reiterated the weight economic research that supports an increase in minimum wage would have no correlation on employment as evidenced in states such as Washington that exceeded the average for job growth despite having the highest amounts of minimum wage (Konczal et al, 2014).
Read also Minimum Wage – Raise it or Not – Debate
Another subject that brings conflict around the increase in minimum wage is the assumed increase in the price of goods and services as economists argue that employers may choose to accept lower profits, raise the price of goods and services or choose to do both. This can be seen in the increase in restaurant prices in states with higher minimum wage requirements. This would lead to a lower demand for locally produced products and impact negatively on economic growth. However, this argument seems to bear little weight as it evidenced by the fact that the prices of goods only seem to go up by 0.4% of the initial price (Konczal et al, 2014). It would appear that this argument only seems to work theoretically and less on the practical level.
The issue of crime brings about an interesting argument to minimum wage increase. According to a White house report in 2017, an increase in minimum wage would lead to less crime. However neoclassical economists would argue that a decrease in the demand for labour due to it’s increase in cost would lead to a decrease in employment leading to the inability of marginalized communities to find legal employment opportunities and increase the crime rate. However, since it has been found that the research that supports the view that an increase in minimum wage has no effect on unemployment bears more weight, it can therefore be said and actually increases employment opportunities, then it can be said that the white house report would have to guide my argument on this issue that raising minimum wage has a positive impact on the fight against crime.
Other issues such as the effects on the Federal budget are subjects of divergent views in discourse especially in the political class. However, has been shown that an increase in minimum wage would increase the budget deficit initially but subsequently increase it. Poverty as an underlying factor to minimum wage increase also raises debate, but as research by Arindrajit (2017) shows, a 10% increase in minimum wage would lead to a reduction of poverty levels by 5%. It seems that an increase in minimum wage either reduces poverty or has no effect on it.
In conclusion, although various arguments have been put forward to support or dispute an increase in minimum wage increase, it is my view that an increase in minimum wage in all states that have not implemented the desired $15 per hour would foster economic growth, reduce poverty and crime and foster the creation of more employment opportunities as evidenced in the states that have implemented this policy. Moreover, there appears to be a variety of political consideration that have overshadowed the need for recognizing the plight of the marginalized low income earners as some states pay above the $15 ideal wage while others fall significantly below. There appears to be a need to raise the issue above the prevailing political paradigms and deal with it on a national level since it deals with the livelihood of the common person. The policy regarding minimal wage having been nationalized the wages can then be adjusted for inflation, consumer price index and locality and follow a steady growth pattern hand in hand with these factors of the economy. Finally, it is important for decision makers to realize that the benefits of a better wage to the low income earner has benefits that outweigh the risk and should be considered as vital in its formulation and implementation.