Reasons for Increasing Minimum Wage Essay

In the past, teenagers would work for extremely low payments probably because of the kind of work that they did back then such as simple office assistance. They also did not have high financial burden. Working under these low wages was never a serious concern. However, the trend has changed and the economic system of today can hardly sustain one if they still sweat for such megre compensation. As a matter of fact, the socioeconomic changes that have occurred over the last few decades have significantly changed the world by increasing the financial burden that can only be shouldered if per capita income of country is high. The wave of technological advancements and climate of modernity has given money a different value piling pressure on people to find ways of achieving financial solace and offering labour to industries and has been one of the many actions that people have indulged in especially in UK. People get into the workforce with expectations of earning some money that can support and sustain them. Although minimum wage rates were initially meant for teenagers who offered simple services for low payments, the poor wages have progressed up to today. In 2011, approximately four million American workers sweated for less than seven dollars an hour (Risher, 2013:7). This shocking statistics has brought up several arguments about whether the governments should consider raising the compensation a little bit higher so that citizens working in the ‚Äėemployed‚Äô sectors can take home some wages that are worth their toils. Thesis Statement: Increasing minimum wage will bring many benefits not only to workers but also to the whole economy.

What is Minimum Wage?

Marx (2007:21) describes minimum wage as the lowest compensation that a labourer gets from their employer on hourly, daily or weekly basis for their informal services that they offer. Wages are compensations paid to unskilled labourers for the manual labour that they offer to their employers. For example, a nanny who baby sits a child when the parents are away can be paid daily once they are done with their jobs. The amount paid may be calculated based on the number of hours that they took with the baby and offered their services. In most states ad nations, there clearly stipulated guidelines that safeguards the lowest compensations that a worker can get. For example in the UK, anyone who is above 21 years is supposed to be paid a minimum wage of £6.5 (As of 2014 official rates). Other countries also have their limited wages that the employers cannot go below. In a nutshell, minimum wage is the lowest rates a worker can be paid by their employers (Risher, 2013:7).

As already highlighted, the society has changed and the economic dimensions of the society have as well transformed. What was a reality in the past is now an illusion. The economic developments have modified structures in the society giving it a new outlook. This implies that mechanisms used in the past cannot be blindly and rigidly be held in the modern world. The value of money in the past is no longer the same as those in the current economy. The expenditure Changes therefore have to be effected to ensure that the reality of the status quo matches well with the demands and expectations of the economy. One of those demands is for everyone to have some ‚Äėreasonable‚Äô money that can sustain them in the ‚Äėexpensive‚Äô economy. It is therefore necessary that alterations and modifications be made to coexist with this reality in the economic system. Workers, just like any other citizens in the nation, are expected to comply and live with the restrictive economic conditions. It is only fair if they are paid good reasonable compensations that can sustain them. However, a uniform payments system can only be achieved if similar standards are applied across the nation (Eyraud and Saget, 2005:114).

Misconception Surrounding Increase of Minimum Wages

There have been serious criticisms that are founded on misconceived propositions concerning the increase of minimum wage rates. Raising the minimum wage has been seen as beneficial to some few young people who have cleared school. It has been regarded that the move will not capture the larger society since the critics view minimum wage as something that only affects the teenagers. This is not true since over 80% percent of those who depend on wages are above the teenage and more than half the number is women (Belman and Wolfson, 2014: 56). Consequently, it has been irrationally conceptualised that when the wages are increased then many people are likely to get retrenched or fired from their places of work. Equally this is not factual as not accurate research has proved this. Instead there are several world economists who have refuted these claims from expert point-views.

The myth that young or rather small businesses will not be in a position to operate under the new terms making them resist is also a misconception. Approximately about 60% of the small enterprises in London hold the view that increased minimum wage would have positive implications (Risher, 2013:7). Among the benefits include: enhanced business activities such as purchasing due the increased money flow in the economy, reduced worker turnover and the general economic growth and development. The performance and productivity of the workers would definitely increase because of the enhanced motivational levels as a result of improved payment rates.

Critics have argued that increasing the minimum wage only affects part-time workers who operate for very few hours. The truth is, over half of those who depend on minimum wages are fully engaged at their work stations. Increasing minimum wage rates has been seen as a wrong move in nation’s economy. It has been rumoured that it will inhibit economic development in the economy. Contrarily, increasing minimum wage will increase the country’s productivity and subsequent economic development since human resources challenges like high employee turnover will go down. It is a reinforcement that will drive people towards constant work making the economy generate high revenues and achieve increased GDP (Mankiw, 2012: 190).

Statistics on Minimum Wage Rate in the UK

There are over one million, three hundred thousand workers who depend on minimum wage rate in the UK which translates to about 5%. Out of this population, close to 60% are women. The figure, however, is higher in Northern Ireland with about 10% encircled by minimum wage pay. In England, 5% of the total workforce is bracketed in the minimum wage pay. Wales and Scotland have about six and 4 percent respectively. There is further disparity in different areas within England with London recording about three percent while North East have up to seven percent. Evidentially, jobs held by under twenty persons account for about five percent of the total UK workforce. Remarkably, the same age group holds about 15% of the total minimum wage jobs in the United Kingdom (Belman and Wolfson, 2014: 116).

Recent Years

Initial Years

Benefits of Increasing Minimum Wage

The world’s best economists have given the governments a green light to increase the minimum wage rate because of several reasons (Formby, Bishop and Kim, 2010: 585-618). There are a number of justifications why it is beneficial to take the bold move of raising the minimum wage in a country. Countries that care for its citizens and are oriented towards economic development have enough reasons why they need to increase the minimum wage that the workforce earns (Boeri and Ours, 2008: 119). Empowering the manual/unskilled labourers as well as bridging the socio-economic status between the rich and the poor is one way of ensuring the general standards of living and quality of life is raised. Some of the benefits of raising minimum wage are discussed below:

Reduce Poverty

One of the reasons why minimum wages should be raised is to curb poverty; a menace that has been elusive for a very long time. The reason why poverty proliferates in the economy is because of the disempowered sections of the society (Neumark and Wascher, 2008: 123). Increase in minimum wage will upsurge the income of the unskilled manual labourers who apparently form the larger percentage of most countries’ population. This large population tend to have low quality standards of life and when this move (increasing minimum wage) is made, it will enable them access and afford better services and commodities which will enable them lead relatively good lives. This way, the country shall have fought poverty much more tactfully (Breno, 2006:141).

Consequently, overdependence on the government for assistance shall go down as people will have the power to purchase what they need without waiting for the government to offer freely things like health facilities, water, and food among others. Raised wages will significantly uplift citizens above the poverty thresholds and narrow the population of the ‚Äėlower class in the society. Protectively, the ‚Äėmiddle class‚Äô constitution will expand due to the increased resources. In most third world countries, the population of the ‚Äėlower class‚Äô is extremely higher (by a big margin) than the middle and upper class. A steady financial boost would therefore pull them out of the abject poverty; something that their low compensations have not been able to do (Brenos, 2006).

Economic Stimulus

The impacts increasing minimum wage will have on the economy cannot be over looked. Generally, from whichever angle this is looked at be it from economic, social or psychological perspectives, one thing that stands is the fact that the economy would grow (Waltman, 2008:138). A country’s’ GDP and overall economic growth are direct dependants of the labour workforce. Interestingly, the unskilled labour workforce forms the bigger volume of the overall workforce in many countries. This shows that a direct stimulation of the unskilled labour workforce through increasing their income who undoubtedly improve their activities leading to high performance (Marshalle, 2006:75).

People get motivated to work when they are reinforced. The manual labours would be greatly motivated to performance better when their ‚Äėsalaries‚Äô are increased. According to Guerrazzi and Meccheri, (2012: 189-197), high employee turnover is one of the reasons why most organisations fail to meet their long term objectives. When employees feel demotivated towards the work that they do, they are likely to seek for excuses that would enable them stay away from work. This implies that the firm or company will miss the contributions of that worker thereby reducing the performance of such organisation. The national economy in turn will not record high performance due to the low performances recorded from companies and organisations that were initiated by the high employee turnovers (Leal and Trejo, 2011:98). The expenditures in training and employee development are minimised when the turnovers are reduced making organisations make improved revenues.

The increased purchasing power that increased minimum wage brings to the people of a nation is a facilitator in economic activities. When people earn more, they spend more and that means that the business transactions and economic trading within the society will be enhanced. New business would not run at a loss due to lack of customers if opened. All the sectors in the economy would be very active (Klasen, 2008: 420-445). For example, those who could hardly afford tourism services will now be able to adventure and send some money in such areas. For instance, the inflation experienced in 1996 in the Great Britain justifies this. After the countries settled from the traumas of inflation, the tourism sector started to record high profits. This is so because the economy had stabilized operating. The demand curve for most products will curl upwards as the probable customers increase.

Social Benefits

Increasing minimum wage rate would not only have economic implications but also the social impacts. The issue of inequality has surfaced the social discourse in United Kingdom and today it has formed an agenda that the politicians campaign with. The gap between the rich and the poor is extremely large and the only way to harmonise the negative attitude the poor have towards the rich is to economically empower the low class individuals (Belman and Wolfson, 2014: 91). Statistical revelations about the command the few rich people have on the country’s wealth are some of the reasons why insecurity and crime among other social deviant behaviours have been on the rise. Trying to level the lower and the higher to a moderate position is a wise strategy to use in solving social problems.

Social problems that occur in slums and various informal sectors would be best counteracted if the wage rates are high. Consequently, those who had resorted to crime as a way of feeding themselves would get enticed by the captivating wages that have been increased. This would probably make some of the criminals in the streets abandon their criminal ways and get to the labour market due good packages they aim to take home after their hard work. As Vaughan-Whitehead, (2010: 152) puts it most criminals engage in criminal acts such as robbery, burglary, pickpocketing mong others because they seemingly pay more than the existing manual jobs. They would rather risk their lives and make good money than sweat and toil whole day for some peanuts. Considering the outrageous amounts the bosses in organisations that hire manual labourers earn, most people have been angered by this making them resort to crime rather than legitimate ways of making money (Lassiter, 2007: 116).

The social programs and facilities would be readily available and affordable for most people if the minimum wages are reduced. Among the reasons that breaks down social relationships in the society is the struggle for social facilities. These in most cases bring problems and heighten crime. For example, there were high rates of crime reported in London when people use public transport going to work. This indicates that shared public resources facilitate emergence of criminal acts. The war towards crime therefore can best be fought when people are economically empowered. The society is likely to achieve order and security thereby creating an enabling environment for business growth and development. Social order is a prerequisite for business development as well as a nation’s economic growth in England and other countries in UK.

Conclusion

As demonstrated, increasing minimum wage is a valid move that a government can make to positively influence its economy. Arguably, there are disadvantages that can be seen when the minimum wage rate is increased. However, the benefits that are achieved when minimum wage rates are raised overly the few demerits. As discussed, the move is not only beneficial to particular individuals who offer unskilled or manual labour and their families but also the general economic growth. The influence that the policies would have on the economic activities within the country is far-reaching. By and large, it would stimulate the economy through rejuvenation of the dormant sectors, increased national productivity, and enhanced purchasing power among others in the UK. Economic empowerment that increased minimum wage would bring to households is equality noteworthy. The mission towards eradicating poverty would be greatly boosted if the low class people in the society are financially energised. This would reduce the overdependence that they have on the government for social facilities. They would therefore achieve self-sustenance thereby improving their standards of living. The social order and stability would ensure that business operate in enabling environments free from interruption. With no doubt, minimum wage rates should be increased to achieve all these benefits.

References

Belman, D. & Wolfson, P.J. (2014) What does the minimum wage do? Kalamazoo, Michigan, W.E. Upjohn Institute for Employment Research.

Boeri, T. & Ours, J.C. (2008) The economics of imperfect labour markets, Princeton, Princeton University Press.

Brenos, R.V. (2006) Focus on poverty, New York, Nova Science Publishers.

Eyraud, F. & Saget, C. (2005) The fundamentals of minimum wage fixing, Geneva, Internat. Labour Off.

Formby, J., Bishop, J. & Kim, H. (2010) The Redistributive Effects and Cost-Effectiveness of Increasing the Federal Minimum Wage, Public Finance Review, vol. 38, no. 5, pp. 585-618.

Guerrazzi, M. & Meccheri, N. (2012) From wage rigidity to labour market institution rigidity: A turning-point in explaining unemployment?. The Journal of Socio-Economics, vol. 41, no. 2, pp. 189-197.

Klasen, S. (2008) Economic Growth and Poverty Reduction: Measurement Issues using Income and Non-Income Indicators, World Development, vol. 36, no. 3, pp. 420-445.

Lassiter, M.P. (2007) Economics, politics and social issues in Latin America, New York, Nova Science Publishers.

Leal, D.L. & Trejo, S.J. (2011) Latinos and the economy: integration and impact in schools, labour markets, and beyond, New York, Springer.

Mankiw, N.G. (2012) Principles of microeconomics, Mason, OH, South-Western Cengage Learning.

Marshalle, M.I. (2006) Economics of unemployment, New York, NY, Nova Science Publ.

Marx, I. (2007) A new social question?: on minimum income protection in the post-industrial era, Amsterdam, Amsterdam University Press.

Neumark, D. & Wascher, W.L. (2008) Minimum wages, Cambridge, Mass, MIT Press.

Risher, H. (2013) Facts on the Minimum Wage. Compensation & Benefits Review, vol. 45, no. 1, pp. 7.

Vaughan-Whitehead, D. (2010) The minimum wage revisited in the enlarged EU, Cheltenham, UK, Edward Elgar.

Waltman, J.L. (2008) Minimum wage policy in Great Britain and the United States, New York, Algora Pub.

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Reasons for Increasing Minimum Wage. (February 17, 2021).
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