Most developing nations see a decrease in poverty when the minimum wage is raised. The minimum wage barely covers a small percentage of disadvantaged people and excludes those employed in the vast informal industries, making the impact negligible. An increase in minimum wage can present advantages and disadvantages for different households, depending on various factors such as salary distribution and employment situation (Neumark, 2018). Nevertheless, such a policy could be a wise economic decision and a component of a comprehensive strategy to fight poverty. This essay aims to discuss and support the President’s Obama Executive Order to increase federal contractors’ minimum pay to $10.10 per hour.
Generally, raising the legal minimum wage is associated with a positive impact on the country’s poverty level. In 2014, President Obama issued an Executive Order, and the minimum wage had increased to $10.10 (Exec. Order No. 13658, 2014). According to Neumark (2018), the key argument in support of increasing minimum wages is that “it helps poor and low-income families” (p. 1). Providing employees from low-income households enables such people to buy more essential goods and services they need to have a good quality of life. Theoretically, raising “minimum wages can redistribute income from consumers to low-wage workers without large efficiency losses” (Harasztosi & Lindner, 2019, p. 2724). Therefore, impoverished people’s incomes will increase, and they will be able to escape poverty. Furthermore, the federal minimum wage’s worth has decreased due to inflation outpacing wage increase rates (Harasztosi & Lindner, 2019). A boost in household expenditure and economic activity would result from additional income. Consequently, more goods and services would be affordable for consumers, companies would benefit from this rise in spending, and jobs could be created due to this economic expansion.
Moreover, government spending on welfare would decline with a greater minimum wage. Low-wage workers’ reliance on government assistance and eligibility for benefits would decrease if they made more money. More than 1.7 million Americans would no longer rely on government assistance programs if the minimum wage were raised to $10.10 (Gindling, 2018, p. 1). The number of goods and services that can be purchased with a monetary unit has significantly decreased because it is not inflation-indexed. Since lower-income households tend to expend a more considerable percentage of their income, raising the minimum wage would positively affect these households. This outcome can result in a rise in the demand for goods and services. Therefore, increasing the minimum wage might help the economy by stimulating it. Low-paid workers have ensured a wage that keeps up with the rising costs of goods and services because of inflation indexing and would be able to adopt a living level consistent with the economic climate if the minimum wage were increased and inflation indexes were.
With a rise in the minimum wage, employees and their families will have more room to operate and opportunities to improve their quality of life and financial stability. Since President Obama’s initiative in 2014, President Biden issued an Executive Order to raise the minimum wage to $15.00, which “will bolster economy and efficiency in Federal procurement” (Exec. Order No. 14026, 2021). Furthermore, such measures will enable the government to carry out its duties more effectively and quickly because higher pay increases productivity and results in less employee turnover.
In conclusion, the choice to increase minimum wages is wise as it will enhance the efficiency and economy of government procurement. Furthermore, companies who already pay a living wage and take advantage of these savings would not be required to change their bids to comply with the Executive Order significantly. As a result, without significantly increasing prices, the new regulation may enable governmental agencies to choose from a higher-quality group of interested parties.
References
Exec. Order No. 13658, 86 Fed. Reg. 51683 (2014). Web.
Exec. Order No. 14026, 86 Fed. Reg. 67126 (2021).
Gindling, T. (2018). Does increasing the minimum wage reduce poverty in developing countries? IZA World of Labor, 2(30), 1-10. Web.
Harasztosi, P. & Lindner, A. (2019). Who pays for the minimum wage? American Economic Review, 109(8), 2693-2727. Web.
Neumark, D. (2018). Employment effects of minimum wages. IZA World of Labor, 6(2), 1-10. Web.