Drawbacks of Raising Minimum Wages

The minimum wage issue has been a part of the US economic and financial scene since the late 1930s. Sometimes, the Congress increases the minimum wage in response to the rising economic opportunities. Some states have also chosen to have a minimum wage higher than the federal minimum wage. Moreover, this is a great sample of statistics research assignments help for a lot of people. There are supporters of raising the minimum wage who argue that it is not justified for companies to make billions while their employees are barely able to support themselves, which many perceive as immoral and anti-social. However, the increasing of the maximum wage has negative ramifications for the economy, the workers, and the business.

Consequences of Raising Minimum Wage

First, raising the minimum wage leads to the loss of jobs and a subsequent increase in the employment rate. Ultimately, the social and economic motive of any business is to earn and maximize its profits. Consequently, businesses are likely to try to react to issues that hit their bottom line negatively, which includes a raise in the minimum wage, as most employers would respond by discharging some of their employees to remain profitable. Moreover, the companies can also choose to outsource some of their labor to countries that have cheaper labor, consequently increasing the unemployment rates in the United States. Furthermore, there is also a possibility that some organizations that are labor intensive will find their operating costs above the level they can reasonably manage and make reasonable profits. This is likely to drive some of them to close their factories, thus increasing the unemployment rate.

Second, the increase in minimum wages would hurt small businesses that constitute a significant part of the employers in America. They comprise small family owned businesses that employ a large number of people in small towns, many of whom are women and teenagers of working age. Increasing the minimum wage burdens most of the businesses in such a way that they cannot cope in the long term. The dramatic rise in the cost of labor will thus prove to be a detriment to these companies that will not be able to absorb the dramatic increase in labor costs. Therefore, the majority of these businesses will be forced to close, not only leading to more unemployment but also affecting the ability of the owners of the businesses to provide for themselves. According to Percival, this is exacerbated by the fact that such an increase would have no significant advantage for employees as employers would have higher payroll taxes, which would have a severe impact on the real value of the income.

Third, an increase in the minimum wage also has an inevitable inflationary effect on the economy. The cost of doing business affects the inflation in the economy as the companies pass the increased costs to the final consumer, thus raising the costs of goods in the entire economy. This causes the cost of consumer goods to increase in the market. Thus, in the short term, employees are likely to have more in their pockets; however, in the long-term, the effect of raising the minimum wage on both ordinary consumers and workers will probably be negative. This because such employees are likely to spend more of their income on the raised consumer good prices, which affects those people with the lowest wages in the country.

Furthermore, one of the reasons the government and politicians want to increase the minimum wage is that most argue that it helps to deal with poverty. The argument rests on the notion that the more the families earn, the more they are likely to be prosperous. However, this concept seems to be based on misinformation as various studies have concluded that an expansion in the minimum wage does not lead to less poverty. On the contrary, there is a possibility of the increase in the number of people who live in absolute poverty. As noted above, the growth in the minimum wage might push the small businesses to close. This not only exposes the dismissed workers to destitution but also adversely affects the owners who have to close their businesses. As the number of people without income increases in the society, this results in more poverty in the community.

Fifth, the effect of the rise of the minimum wage on the unskilled and semi-skilled workers is also likely to be negative. Most minimum wage employees, who are usually people with the lowest skills or qualifications, cannot justify higher wages that the employer is willing to offer. Consequently, rather than continuing to hire new low-skilled workers, the companies are likely to dismiss employees with low qualification to hire highly skilled people. Moreover, even in the case where they do not discharge such workers, there is a probability that such organizations will stop hiring new low-skilled workers. In addition, the increased payment for minimum wage jobs means that people who are more skilled are likely to apply for such jobs, thus eventually pushing out lower-skilled workers out of the workforce. Considering that the jobs for the semi-skilled workers are often limited in the economy, this is likely to have an adverse effect on the country.

Some economists and social scientists have also explained that increasing the minimum wage reduces the likelihood of economic and social mobility for the workers. The minimum wage jobs are usually the entry employment in most industries where the workers have training jobs. As such, this is typically the first step in the employment ladder, providing the experience these workers need to have to move to the next level of work. Increasing the minimum wage, or in fact having minimum wage laws, increases market rigidity, which can lead to people facing difficulties while climbing the economic ladder. As such, relative and absolute mobility in the workplace is affected, which can lead to a discontented work environment.

Moreover, the workplace now is more technology driven. Most of the processes in the workplace, especially in labor-intensive industries, can be automated. An increase in the cost of labor is likely to see an increase in the number of processes that are automated, leading to a massive loss of jobs for the semi-skilled workers. The companies and other business organizations are likely to dismiss people who earn the minimum wage or, as an alternative, to stop hiring such individuals and use robots instead. These include jobs such as vacuuming, delivery of products and packaging which can be easily automated without losing efficiency. This will influence a vast number of people and will, in the long run, lead to increased unemployment rates and possibly higher poverty levels. In a sector that hires many people who the earn minimum wage, such as restaurant chains, retail, and agricultural sector, automation will cost most of the jobs.

In the future, the research on the issue of the impact of the minimum wage increase is likely to be a less protracted one. It is anticipated that a free market will operate more freely, and thus issues like the minimum wage will be determined without any interference from the market. As an alternative, a continued increase in the minimum wage will lead to more jobs being shipped overseas as the companies struggle to pay the federal and state mandated minimum wages at home. Consequently, it is possible that in the future, the research will focus more on the relationship between job outsourcing to foreign countries and the minimum wage. Furthermore, there is scant research on the relationship between the minimum wage and poverty. Thus, in the future, the research is likely to explore the relationship between the increase in the minimum wage and poverty in various communities in the United States.

As it is apparent from the essay, raising the minimum wage has a significant number of drawbacks. First, it leads to the loss of jobs and an increase in the unemployment rate as employers discharge workers. Second, it is also likely to result in hurting small businesses who will be forced to close because they will not afford higher wages. Third, as the wages increase, inflation also increases, thus adversely affecting very small earners it was meant to help. Moreover, unlike the popular assertion, an increase in the minimum wage does not reduce poverty. The competition for jobs, which will be a result of the increase in minimum wages, is also likely to cause a situation where more semi-skilled workers lose their jobs. The increase in the minimum wage also leads to the lack of relative and absolute social mobility in the workplace. Lastly, with the increasing use of technology, raising the minimum wage is likely to result in employers automating most jobs as they seek to maintain their profits, thus negatively impacting employees.