The policy of minimum wage is a law that sets the lowest amount of money employers should pay their employees. It is intended to help people, who are paid extremely low wages to get self-sufficiency. Although this policy surely has some arguments against it, overwhelmingly it is considered to be right.
Origins of the minimum wage
The term “minimum wage” was firstly used in the late 1890s in such countries as New Zealand and Australia. After twenty years, this policy reached the United Kingdom, and since twenty years more spread to more than 30% of US states (Neumark & Wascher, 2008). Finally, by the end of the twenty century, over a hundred countries throughout the world, both industrialized and developing, established their minimum salaries for the workers.
From the very beginning, a minimum wage was meant to beat “the sweatshops”, which provided people with extremely low wages (Neumark & Wascher, 2008). So, with the help of minimum wages, the government attempted to get those people fairly paid. From that time, the policy of minimum wage has become widely excepted and overwhelmingly is considered to be right. However, it is still can sometimes be criticized. The disadvantages of the minimum wage are presented below.
Arguments against the minimum wage policy
The most common argument against a minimum wage is that it can be the cause of unemployment. Unwilling to pay more to their workers’ employers can cut the number of work positions. Besides, in the case of staff reduction, the most vulnerable employees, those who are new and inexperienced in the sphere they work in will be fired.
The second possible risk is inflation. With the higher salaries, people will be able to pay more and so will buy more expensive goods. Considering that fact firms will raise their prices.
Along with all of these, a business failure can come (Waltman, 2008). Both reducing the number of workers and raising the prices, a company risks not meeting the expectations of its purchasers so that they will go to competitors.
Finally, some claim that minimum wages are not the best solution to fight poverty. According to Flinn (2010), people who live on minimum wages are primarily part-time employees and those who work in serving or food preparation spheres. Most frequently those positions are occupied by the student still living with parents. Therefore, poor families do not receive many benefits from the minimum wage policy.
Arguments for the minimum wage policy
On the other hand, many of the disadvantages mentioned above also have their bright sides. For example, staff reduction causes competition, both for employees and people looking for a job. Therefore, people will do their best to get a position and to hold it, the productivity of their work will arise, and firms will have better-qualified specialists.
As for a business failure, while the small and weak companies do risk leaving the market the strongest will survive. So, the whole situation will not change.
From the economic point of view, minimum wages are also good for purchasing power, cause, as already was mentioned before, with higher salaries people can buy more products, including more expensive ones.
Finally, although the majority of those who get minimum salaries do not come from poor families, there still is some percent of those people. Besides, minimum wage policy as a poverty-fighting strategy does not require any additional taxes (Waltman, 2008).
To conclude, the policy of minimum wage, if adequately applied, is right, both from the moral and economic points of view.
References
Flinn, C. J. (2010).The Minimum Wage and Labor Market Outcomes. Cambridge, MA: Massachusetts University of Technology Press.
Neumark, D., & Wascher, W. L. (2008). Minimum Wages. Cambridge, MA: Massachusetts Institute of Technology Press.
Waltman, J. L. (2008). Minimum Wage Policy in Great Britain and the United States. New York, NY: Algora Publishing.