A higher minimum wage is beneficial to both large and small businesses. First, higher pay motivates workers to be more productive and goal-oriented. In recent research, 80% of the interviewed business executives proposed a higher minimum wage. Besides boosting productivity, businesses will experience more growth as the costumer’s disposable income, and purchasing power will increase. Besides, the rate of employees’ absenteeism will decline as well as consumer demand. Researchers state that fair pay reduces mental and physical health issues among employees, consequently reducing intentional and unintentional fatigue.
Moreover, a higher minimum wage fuels the economic growth of a country, creating a positive development for small and large businesses. Research indicates that increasing the minimum wage to at least $10.50 will increase the country’s net income of approximately $222 billion and generate more than 100,000 employment opportunities. Consequently, the consumable income for individuals will increase as well as the propensity to save. Roughly $200 billion will be regenerated to the country’s economy through food, medical bills, and other necessities. A wealthy economy implies better infrastructure, better social amenities, and more political stability.
Raising the minimum wage will reduce poverty.
The federal poverty level for a single household, i.e., a person with no family responsibilities, is $12331 per annum. On the other hand, the national poverty level per annum for a single-parent family with a minor is $ 16337. Thus, since the amendment of the 2009 minimum wage bill, a person earning the minimum hourly wage is 20% higher than a single person’s poverty level and 8% lower than a single-parent family. This would mean that families headed by single parents who receive the minimum hourly age live below the poverty level. Raising the minimum hourly wage to $9 would remove 300,000 families from poverty, whereas a raise to $10.10 would deliver almost 900,000 families. Thus, if the proposed $15.50 minimum wage bill is passed, millions of individuals will live beyond the poverty line.
The current minimum wage fails to adhere to the rate of inflation indexing. As a result, the purchasing power of individuals earning the minimum wage of $7.50 continues to drop as the cost of living plummets. In 1968, the minimum hourly rate was $1.60, which is equivalent to 11. 50 in the current living conditions. Thus, todays current minimum hourly wage is 54% lower than the minimum hourly wage in 1958, which indicates a failure in inflation indexing. Since the new minimum wage bill amendment, the $7.25 rate has lost 8.1 % of its purchasing power. Lack of indexing has led to meager standards of living among minimum wage earners. The only way to match the inflation indexing rate is by raising the minimum wage to at least $11.50.
Arguments against a higher federal minimum wage
Opponents of a higher minimum age argue that an increased federal minimum wage will increase the price of consumer goods. A minimum hourly wage would increase the cost of production, i.e., labor. To compensate for the high cost of labor, producers will then pass the costs to consumers through increased prices. A study conducted by Purdue University reveals that an increase of minimum age to $15 per hour would increase the price of products by 4.3%. Alternatively, producers may opt to reduce product size by 12%. For instance, a pie would be much smaller or of less quality. After California updated its minimum wage to $122.20, the price of coffee rose by almost 20%.
Besides, a rise in the hourly rate would cause unemployment among college students and teenagers. A significant proportion of minimum wage earners comprises unskilled part-time and full-time students. Most companies will not risk paying an unqualified student a high minimum hourly rate. For instance, the 2009 minimum wage amendments led to a sharp fall of 8% on students’ employment levels. Economists argue that unemployed students have a lower likelihood of getting employed immediately after graduation.
Conclusion
The minimum wage has been in existence since 1938. However, today minimum wage earners have low standards of living than their counterparts in the 60s. The current federal minimum wage has contributed to several adverse effects, such as a high poverty level and low living standards. Updating the remuneration to the proposed hourly rate of $15.50 would reduce the poverty levels by millions and fuel the country’s economic growth. Moreover, inequalities experienced by minority groups would decline by a significant margin. Opponents of an increased minimum wage bill, on the other hand, argue that it will lead to an increase in the cost of consumer goods.