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Posted: July 7th, 2022
The Minimum Wage Should Be Increased
The Minimum Wage Should Be Increased
The article What You Need To Know About The Minimum Wage Debate Kelly Anne Smith outlines the effects of tampering with the minimum wage, rationally explaining the consequences of raising or keeping the minimum wage as it is. The Minimum wage works to protect workers, especially in low (unskilled sector) from exploitation and unduly low wages from employers. It is a tool that can be effectively utilized to help cater for minimum standards of living for all persons employed. It is a form of protection that can be applied to guarantee a better/ quality life for all. Increase of minimum wage, at least for in the macro sense, would raise individual worker’s earnings and cater for a greater family income in most low wage communities, lifting families out of poverty; but there is a potential that it may result many low-wage workers losing jobs, resulting in greater economic inequality.
A general passive attitude within the government in regard to low minimum wage has resulted in a number of Americans missing the opportunity to attain the American dream. Instead, more and more American citizens are plagued by high student debt, limited retirement fund opportunities, limited medical insurances, and generally a bleak future. The article argues for the need to increase minimum wage to $15 per hour, a concept that has been introduced by many democrats, and a campaign promise by President Biden in his America Rescue Plan worth $1.9 trillion (Smith). But how effective would raising the minimum wage be for the nation?
While an increase of minimum wage at the national level is overdue, the short and long term effect risk rising the level of inflation within the economy. Inflation, is a general increase in in prices due to the rising cost of production of goods, that triggers a fall in purchasing value of money. Rise in inflation is bound to be achieved with increase in minimum wages, as more and more employers will find it untenable to sustain most of their employees, and pay them a higher wage. Smith outlines that an increase in minimum wage, triggers most of the employees losing their jobs, and an increase in prices of goods and services or in the worst case scenario both.
Generally, there is a valid argument that increasing minimum wage would result in better living standards. Researchers indicate that increasing minimum wage through unsustainable policies may result in increased unemployment as it situates a price above the demand for labor (Smith). On the contrary, a reasonable increase in minimum wage would benefit the workers as it becomes a more inclusive tool to be used in balancing and preventing the runaway economic inequality within the society. Situating minimum wage increase at a more reasonable position can work to increase employment, enhance growth and cater for a more efficient labor market (Smith). Workers become motivated and productivity within the job sector increases for the benefit of the organization as more people feel included or protected from poverty.
Increasing minimum wages, effectively brings about more economic equality within the society. It also raises economic activities especially in low class areas as it raises the spending capacity for most individuals. Smith outlines that an increase in minimum wage “help ensure a just and equitable share of the fruits of progress to all, and a minimum living wage to all who are employed and in need of such protection.” This plays a great factor in lifting the motivations of the worker, ensuring efficiency and increased productivity within their respective fields, as they feel included and have more income to support other aspect, such as paying for housing, food, education. It stimulates upward social mobility and ensures general social growth.
A generally accepted definition of what minimum wage entails would show a greater concern for workers on the part of the government. Smith outlines that as it is governments and employers have not attempted to set a framework for consistent hike in minimum wage, driving millions to poverty, job dissatisfaction and a higher level of job loss. Large corporations and employers as such come to have monopsonistic powers. This they use to stifle employees. Smith outlines that in the event that job losses in the formal sector are high, raising the minimum wage would increase poverty. But the contrary is also true, by reducing monopsony in the labor market job retention will grow, and minimum wage hikes would lower poverty.
When poor or low skilled workers get more minimum wage, they have more to spend, and in a sense stimulate the demand for goods and services, as well as giving them more leverage against employers. Smith outline that in such cases workers come to have more bargaining power against their employers, and labor markets monopsony reduces greaterly. This is a statement that other researchers agree with stating that an increase in minimum wages reduces labor market domination by employers, in the favor of employees, exerting positive effects on labor market outcomes by reducing employer’s excessive market power (Smith). Overall tilting the power within the labor market to a more balanced field, which is beneficial for workers as well as employees.
Smith, K. (2021). What You Need To Know About The Minimum Wage Debate. Forbes Advisor. Retrieved 23 November 2021, from https://www.forbes.com/advisor/personal-finance/minimum-wage-debate/.
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