Although the minimum wage recently adjusted by congress in 1997 was designed as a policy to raise the income for low skilled workers in the United States, however there are some significant questions about the effectiveness of the policy. For example, American citizens are wondering if the policy favors certain individuals in the economy, and will an increase in the minimum wage hurt some individuals as well? The minimum wage by definition is the lowest rate at which an employer can legally pay an employee; usually expressed as a pay per hour and would be considered illegal for employers to pay any one below the legal limit. According to the study of the United States economy, supporters of the minimum wage and the call to increase it claim that it would increase living standards, and decrease government spending on social programs. In contrast, the people that oppose the increase of the minimum wage claim that the policy hurts small business owners by making it hard to afford an employee and would cause a high rate of unemployed citizens.
First, in the United States, the low-skilled workers most likely to receive the minimum wage would be a teenager because they have few or no job related skills for labor. For instance, a teenager in high school may find the idea of making $5.15 an hour at a fast food restaurant worthwhile because he or she does not need a degree in science to acquire the job. Economists believe that the effectiveness of minimum wage on the economy as related to unemployment is very minimal. The questions “will an increase in minimum wage hurt some individual in the United States economy?” is very debatable. All over the states across the country in different job categories, small business owners can not afford to increase the wage of their workers because their business expenses is built around the cost of a workers productivity. The employers claim that an increase in a worker wage means an increase in the cost to operate the business, which could lead to inflation on goods and services, and productivity would decrease if there is insufficient amount of workers in the business. Furthermore, a sudden decrease in the total number of workers employed by a business due to the government changing the pay plan could result to people losing the jobs because employers may not be able to afford them. Certainly, it is clear that an increase in minimum wage is bad for small business owners because they cannot afford to pay their employee an amount over the amount budgeted to run the business when it was first created.
In addition, increasing the standard of living for low-skilled employer is the bedrock foundation of the minimum wage because in this system every one even student without a degree like high school, college student and other citizen can actually earn a significant amount of money to afford daily needs. Thus, this idea draws a sense of independence among Americans and further encourages them to keep working. Also, according to the supporters of minimum wage, the increase means fewer burdens on the government because they do not spend billions of tax dollars on social welfare issues, which could generate some profit for the government.
Though, increase in minimum wage seems unfair to small business owners, but there are other businesses that do not mind the increase in employee wages. Large scale corporations like AT&T and other industrial giants don’t really care about the increase in minimum wage because of two factors; they think of increase in the wage as an efficiency wage, and the idea of being able to afford to pay what it take to get the job done. Evidently, the level of wage paid to an employee can affect the employee’s productivity. In general, large business owners feel that people are motivated to become more productive in the workforce, if they are getting paid more. Surprisingly, the “efficiency wage” tactics by large business owners works better to their advantage because while small business owner could not afford any employee to maximize the goods output, large business owners use their money as an advantage to afford workers and increase their goods output, so they can decrease the price on their goods and eliminate their competitors. For instance, a company like Nike can afford to decrease the price on their goods, which would increase the quantity of their goods that would be demanded. Fortunately, if Nike increased their employee’s wage, then they would be motivated to speed up and deliver the required goods for supply as efficient as possible; thus maximizing Nike’s profit because they have goods available when everyone else does not.
Positively, it is clear that large business owners have been favored by high wages and they can afford to pay workers more money to produce more of quantity of goods demanded and keep their price low. On the other hand, the opponents of high wages, which are basically small business owners, claim that having a low minimum wage helps the economy by reducing unemployment. Small business owners argue that low minimum wage will keep more people in the work force employed because any large or small business owner can afford to hire them.
In my opinion, we should also strive to uphold important rights such as free speech, freedom of association, and freedom of assembly. This will allow people to protest against companies that pay unfairly low wages, discriminate against women and/or minorities, cause environmental pollution, or engage in other questionable practices that are sometimes undertaken by overzealous capitalists who do not seem to understand the importance of maintaining a high morale workforce or the benefits of cultivating good relations with their local communities. Finally, from all the evidence stated about minimum wage, it is significant for the American government to consider both large and small business owners in their decision about improving the economy and the standard of living. Thus, I think there are other ways for the government to tackle the minimum wage issue by introducing like the idea of income tax credit. The income tax credit reduces the amount of tax that low income wage earner would pay to the federal government. In addition, this principle would place a lesser burden on small business owners that employ many low-skilled workers, but may cause loss of economic efficiency.