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In 2009, the United States Congress increased the federal minimum wage from $6.55 to $7.25 per hour. The move was tremendously applauded by the labor force in the country. In the recent past nonetheless, a debate has ensued whether or not the federal minimum wage should be increased from the current $7.25 an hour. Consequently, the debate has seemingly divided the country into two sides. The proponents of debate have argued that the current minimum wage is miserably too low for the American citizens to live on. For this reason, they have rallied behind the quest to have better wages for the workers in an attempt to bridge the gap between the middle class and lower class citizens as well as making the cost of life bearable. On the other hand, the opponents of the debate have countered the proponents by alleging that it would significantly burden the country’s wage bill leading to layoff of the staff especially in low income regions in the country. This essay seeks to comprehensively deliberate on whether the federal minimum wage bill should be increased or not.
There are a couple of reasons as to why the minimum wage bill should be increased from the current $7.25 per hour. One of the reasons is that an increased minimum wage would improve the standards of living among the American workers (Romich, 2017). In the recent past, the cost of living the United States has significantly gone up bearing in mind the price of fuel, housing, mortgages and food. Therefore, the daily expenses that are incurred by majority of the American population that are working under minimum wage such as rent, transport, communication, power, water as well as food have all gone up in the country. In light of this, a minimum wage of $7.25 proves to be too minimal for workers to live on (Romich, 2017). Thus, increasing the federal minimum wage would allow more citizens to afford the basic necessities of life enabling them to improve their living standards in the long run (Romich, 2017). Consequently, the poverty levels in the country would significantly reduce as a result of better wages.
In addition to improving the living standards, the federal minimum wage should be increased as it would boost the economy and in turn, provide more employment opportunities (Lopresti & Mumford, 2016). According to Lopresti and Mumford (2016), increasing the minimum wage would inject more money into the American economy which would boost the gross domestic product of the country. Consequently, economists argue that a thriving economy increases the employment opportunities in the workforce as more people are required to drive the thriving economy (Lopresti & Mumford, 2016). Bearing in mind that unemployment is still a huge burden in the country, increasing the minimum wage would, to a great extent, alleviate the unemployment rate in the United States.
Besides that, increasing the minimum wage for the American workers would be a massive saver for the federal government with respect to the money plunged into social and welfare programs (Lopresti & Mumford, 2016). Ideally, social and welfare programs are meant to support beneficiaries that are less privileged and poor in the country. If the low-income earners in the country had a better minimum wage for the respective work that they do, their dependence on the federal government support would considerably reduce (Lopresti & Mumford, 2016). For this reason, it would be more effective for the government to channel welfare support funds to increase wages which would save on the national budget as well as improve the standards of living the Americans.
In addition, the federal minimum wage should be increased as it has not kept up with the inflation rates in the country and the world at large (Mărginean & Chenic, 2013). Since the federal minimum wage bill was increased to $7.25 in 2009, the inflation rate in the country has considerably gone up by a staggering 8%. As a result, the minimum wage has ideally lost part of its purchasing power as it does not factor in the inflation (Mărginean & Chenic, 2013). In further addressing the issue, Mărginean and Chenic (2013) state that minimum wage workers should receive an increase in wages to ensure sustainability and keeping up with the inflation rates. In so doing, low income earners would be able to afford living standards that correspond with the prevailing economy. It is for this reason therefore that the minimum wage should be increased.
Despite rampant calls for the increase of the minimum wage, opponents have counter-attacked the calls citing various reasons. One of the reasons as to why the minimum wage bill should not be increased is that it will contribute to unemployment rates in the country (Mărginean & Chenic, 2013). Bearing in mind that the country’s major employers are the small businesses, increasing the minimum wage could consequently lead to retrenchment of staff in the country. The employers would find it difficult to manage the wage bill and would be compelled to lay off workers in order to pay the remaining workers better (Mărginean & Chenic, 2013). In addition, increasing the minimum wage would also result to slow hiring rates, increasing the burden of unemployment in the country (Mărginean & Chenic, 2013). Employers would be obliged to hire few workers in an attempt to limit the wage bill from ballooning. Considering this, the government should not increase the wage bill during the current prevailing economic times in the country.
Furthermore, it would not be a wise move to increase the minimum wage bill as it would trigger the rise in price of consumer goods in the country. According to Mărginean and Chenic (2013), increasing the minimum wage from $7.25 to a high rate would create the impression that the general public has more money and a higher purchasing power in turn. Thus, economists argue that a rise in the federal minimum wage bill would prompt dealers in consumer goods to increase the prices (Mărginean & Chenic, 2013). For instance, prices in food, rent, power and gas would increase as a result. In so doing, it would make no economic sense increasing the minimum wage only for consumer goods to also increase in price.
Moreover, increasing the minimum wage rates in the country would compel American companies to outsource labor from foreign countries where the wage bill is ideally lower and affordable (Mărginean & Chenic, 2013). The American economy is highly competitive. In light of this, most American companies tend to reduce the cost of doing business in order to maximize on the profits as a way of getting a competitive edge over their competition. Thus, companies would seek to reduce their wage bills by outsourcing labor overseas. This would in turn hurt the American economy as it would increase the unemployment rates in the country as well as reduced flow of cash in the markets (Mărginean & Chenic, 2013). Therefore, it would not be ideal for the federal government to increase the minimum wage.
In conclusion, it is clear that increasing the minimum wage in the country has its pros and cons. Therefore, it forms a subject of serious consideration for the government, congress and all stakeholders in the economy. It is important that relevant consultations are made before making a decision regarding the possibility of increasing the minimum wage in the United States. In a humble opinion, increasing the minimum wage would not be the right economic decision to be made at this time in the United States. Considering the risk at stake, it would be too much of a gamble due to factors such as increasing the cost of production making the United States products to be less competitive in the international markets as well as in the domestic markets. This is mainly because in countries such as China, the cost of production is low due to the high availability of cheap and skilled labor therefore making the Chinese manufacturers to effectively compete in the international market due to the low price of commodities. However, in the next couple of years the federal government should seek alternative methods that can be used to reduce the daily cost of living alongside raising the minimum wage so as to promote the quality of life of American working for minimum wage.
We can do it today.
- Lopresti, J., & Mumford, K. (2016). Who Benefits from a Minimum Wage Increase?. ILR Review, 69(5), 1171-1190.
- Mărginean, S., & Chenic, A. (2013). Effects of Raising Minimum Wage: Theory, Evidence and Future Challenges. Procedia Economics and Finance, 6, 96-102.
- Romich, J. (2017). Is Raising the Minimum Wage a Good Idea? Evidence and Implications for Social Work. Social Work, 62(4), 367-370.