Essay Example on Impacts of Minimum Wage Increment

Published: 2021-08-11
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George Washington University
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The issue of minimum wage brings about diverse points of view. It is profoundly influenced by regional differences and different political positions. Matters of the minimum wage are of extreme importance mainly to business people because they are expected to abide by the set minimum wage laws. The federal minimum wage in the United States today equals to fifteen thousand and eighty dollars per year (Dixon, 2017). This wage translates into reduced economic mobility, a reducing middle class, and low standards of living.

The minimum wage was first introduced into the United States in the year 1938. It is the least amount of money that an employer can pay an employee. It was introduced at $0.25 an hour. Over the years this federal minimum wage has increased twenty-two times. The federal minimum wage was recently updated in 2009 where it was raised to $7.25. Twenty-nine states, however, have a minimum wage that is higher than the set federal rate (Dixon, 2017). Whenever the federal and state minimum wages differ, employees receive the higher of the two values. The topic of raising the minimum wage has sparked controversy and debate over the years.

People who do not support an increase in the minimum wage believe that this is a burden that is placed on business owners, mainly those who own small and medium enterprises. They believe that this, in turn, translates into reduced employment levels and slow economic growth. Conversely, those who support an increase in the minimum wage say that it has not kept up with the high inflation levels and that majority of workers who receive minimum wages are impoverished (Bhorat, Stanwix & Kanbur, 2014).Research conducted in America showed that seventy percent of citizens support an increase in the minimum wage.

There are different reasons why the minimum wage should be increased. This could bring a reduction in the race and gender-based income inequality. There has been quite a massive disparity between the haves and have-nots, where the rich are extremely rich, and the poor are impoverished. Having a minimum wage will ensure that business owners pass on some of the realized revenues to their employees who work hard all day just to make ends meet. This could also ensure that all low-income earners regardless of age or gender receive fair compensation. Many people from minority groups earn low wages. This increase could, therefore, aid to reduce this income difference between people of different ethnic groups.

Different studies have shown that there is little correlation between increases in minimum wages and unemployment levels. Therefore, when the wages are raised, people will not start losing jobs to enable the employers to compensate some of the other employees. Additionally, employers whose firms provide a high minimum wage amount are likely to experience low turnover rates in their organizations. This is attributed to the fact that they feel more satisfied and comfortable in their jobs and therefore have a low probability of quitting (Manning, 2016). This is beneficial to the employers because they incur fewer expenses in the process of hiring and training new employees.

The minimum wage levels have not kept up with inflation over the years, which has led people who receive minimum wages to living in impoverished states. Majority of these people have been unable to afford the bare minimum basic needs which have, in turn, made their children live in the same conditions primarily due to the lack of a proper education.

Additional incomes that people would receive would also aid in growing the countrys economic levels (Neumark, 2014). This would come up when they spend their income in purchasing different goods and services which would in turn ripple through the economy.

Moreover, the expenses that the government incurs in social programs would be reduced resulting in lower taxes for all citizens in the country. This would happen due to the reduced government expenditure on different matters such as health payments because the people can pay for most of their expenses (Neumark, 2014).

There are however different arguments that discourage the increase in minimum wage levels. For companies that have a fixed remuneration budget, increases in the minimum wage could lead to layoffs for some of the employees. It could also cause salaries for the employees who receive higher payments to be reduced, and those who deserve a raise in their salary may not receive it as the company strives to pay other workers in accordance to the set minimum wage levels (Wilson, 2012).

In a bid to offset the high labor costs that the companies incur, firms could increase the price levels of their different goods and services (Wilson, 2012). This could also lead to businesses overworking their employees to avoid paying the high set minimum wages.

High minimum wages could also lead to high school drop-out cases. Students could view the high minimum wages as lucrative and choose to work as opposed to staying in school. Companies could also choose to invest in technology, automated processes, and machinery to carry out their different processes. This could, in turn, lead to high unemployment levels and consequently low economic growth and low living standards (Wilson, 2012). The increase in minimum wages could also cause companies to outsource labor to other countries that have lower minimum wages leading to loss of employment opportunities for country members.

It is evident that an increase in minimum wage levels has both advantages and disadvantages. In many instances, though minimum wages increase, the real value of money drops which means that the increase in minimum wage has no real benefits. Different studies have shown that there is a low correlation between the increase in minimum wages and reduction in poverty levels. Minimum wage increase will be of no benefit if it is accompanied by high prices for different goods and services. Moreover, it would not be beneficial if it leads to a loss of jobs for many of the employed people as companies try to reduce costs and make profits. Additionally, it is crucial for the authorities to ensure that students do not perform minimum wage jobs until they are of legal age. This would assist in reducing the number of school drop-outs performing these jobs.

Therefore, the government should strive should strive to ensure that the economy is stable and that inflation levels are as low as possible. This will ensure that in instances where the minimum wage is increased, there is a real value associated with this increase which will, in turn, enable companies to compensate their employees by the set standards and ensure that the countrys economy improves due to this increase. In conclusion, the government should first stabilize the economy then increase the minimum wage to ensure that employees enjoy real value from the wage increase.


Bhorat, H., Stanwix, B., & Kanbur, R. (2014). Estimating the Impact of Minimum Wages on Employment, Wages, and Non-Wage Benefits: The Case of Agriculture in South Africa. American Journal of Agricultural Economics, 96(5).

Dixon, L. (2017). How Does the Minimum Wage Impact the Economy? Talent Economy.

Manning, A. (2016). The Elusive Employment Effect of the Minimum Wage. Center for Economic Performance; CEP Discussion Paper.

Neumark, D. (2014). Employment effects of minimum wages When minimum wages are introduced or raised, are there fewer jobs? Employment Effects of Minimum Wages. IZA World of Labor 2014: 6.

Wilson, M. (2012). The Negative Effects of Minimum Wage Laws. Policy Analysis, (701).

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