The federal minimum wage was brought into effect in 1938 at $0.25 and saw a rise periodically. The actual fluctuation was seen in 1968 at $1.60 due to inflation. President Barack Obama has now proposed the minimum wage to be increased from $7.25 to $10.10 per hour which would raise 900,000 Americans out of poverty, but 500,000 jobs will be at risk.
Conservatives believe that raising the minimum wage means putting burden on companies that have slower growth rate while liberals believe that it should be increased keeping the inflation in mind.
Pros of increasing the minimum wage
- Instead of companies paying their workers for their effort, the government pays the workers in the name of ‘income transfers’ like tax credit, medical insurance, etc. Increasing the minimum wage means that worker will receive the paycheck directly from his company, rather than depending on government expenditures. Taxes for other American citizens will be lowered and government can get more revenue.
- Many low wage workers would get a higher pay which would increase their annual income and others may see a rise in their income above federal poverty line. In short, standard of living among workers will improve. Raising the minimum wage means keeping up with the inflation.
- There have been studies to show that an increase in the minimum wage will have low effect on unemployment.
- Additional expenses spent by consumers will improve the economy of the nation.
Cons of increasing the minimum wage
- It can result in loss of jobs with a fixed compensation.
- Companies will hire few workers for entry level jobs which means lesser opportunities for those starting their career.
- More money will be pumped in for technology rather than human resources.
- Increase in price to counterbalance high labor costs.
- The salary of those getting paid well might hardly see any raise.
But there have been studies to show that an increase in minimum wage leads to earnings in income, reduces poverty and the impact on employment is negligible. Studies have also shown that restoring self-esteem will lead to better productivity. Many also claim that raising minimum wage can lead companies to outsource their jobs. But a low wage workers job cannot be outsourced, say that of a caretaker or a janitor. Increasing the minimum wage means lowering inequality and restoring the value of work as every American should be able to reap the benefits of his/ her hard work.