Ali Hasan
“Source: Kalibrado.com”
Minimum Wage
The concept of minimum wage was introduced to protect the dignity of employees and also to keep in check whether an employer doesn’t get away with paying little to nothing to his employees.
By definition, a minimum wage is the lowest remuneration that employers can legally pay to their employees—the price floor below which employees may not sell their labor. Most countries had introduced minimum wage legislation by the end of the 20th century.
The movement for minimum wages was first motivated as a way to stop the exploitation of workers in sweatshops, by employers who were thought to have unfair bargaining power over them. The minimum wage was introduced in 1938 by President Franklin D Roosevelt in the USA and he kept it at 0.25$/hour and it was increased every few years according to the market conditions.
Over time, minimum wages came to be seen as a way to help lower-income families. Although minimum wage laws are now in effect in many jurisdictions, differences of opinion exist about the benefits and drawbacks of a minimum wage.
Supporters of the minimum wage say it increases the standard of living, reduces poverty, reduces inequality, and boosts morale. In contrast, opponents of the minimum wage say it increases poverty and unemployment because some low-wage workers “will be unable to find work and will be pushed into the ranks of the unemployed”.
Because minimum wages increase the cost of labor, many companies try to avoid minimum wage laws by using gig workers, moving labor to locations with lower or nonexistent minimum wages, or by automating job functions.
You might think that the minimum wage would help a lot of people but as Thanos said that “reality is often disappointing” and this is the same case with minimum wage. Today we will take a deep dive into this concept and evaluate both sides of the arguments to determine whether giving a minimum wage helps the economy or not.
While politicians like to increase the minimum wage because they get a lot of votes but it can prove deadly and shut down many small businesses. When the government decides to increase the minimum wage, a small business owner is at a greater risk of going out of business because they can’t pay the new wages to their employees.
But at the same time, big corporations love this idea because they have the resources to pay their employees the new wage while small businesses go out of business simply because they couldn’t pay the wages.
But while the big corporations do pay their wages, they don’t have a loss as they shift the burden to their consumers. If something was costing them $100, then they will price it at $110 just to make up their profits.
Hence, the minimum wage looks good on paper but it might prove to be counterproductive as it helps in ensuring a monopoly for the big corporations while cleansing out the smaller businesses.
But a new study found out that a minimum wage could help the economy as more and more workers join the workforce and stay longer with their employers because now they are being paid a higher amount of money than before.
The minimum wage can give 27 million workers a pay bump and increase their standard of living instantly. But at the same time, the report also suggests that 1.4 million workers might lose their jobs as business owners might fire some employees due to the increase in minimum wage.
It’s estimated that 900,000 Americans could lift out of poverty if the minimum wage is increased to $15/hour but it would also create a $54 billion deficit which would be difficult to overcome.
The minimum wage has another problem that isn’t addressed and it’s that anyone who isn’t employed won’t get the benefit of an increased wage because that person doesn’t have a job. Hence, politicians need to also think about generating employment rather than simply focusing on increasing the minimum wage.
But in another incident, reports of increasing the minimum wage are positive. Recently, a restaurant owner just increased the minimum wage to $15/hour from $7.25/hour. You might think that doubling the salaries of his employees might have closed or bankrupted his business.
But this is not the case with him. In fact, he received over 1,000 job applications within a week. The restaurant had 16 job openings and they filled all of it in just a couple of days. This is the effect of raising the minimum wage to $15/hour.
The increased salary gives them more satisfaction as well as a sense of job security. This makes employees to stay longer with their employers and the churn rate is reduced exceptionally. This saves time for employees as well as employers and increases productivity at the same time.
A decent minimum wage also helps employees to attain a modest yet adequate standard of living. Another advantage is that the more people earn money, the less they rely on government programs and subsidies. This means that there is less pressure on the government and in the long term, it will save a lot of taxpayers’ money.
There will be another advantage that will benefit a lot of low wage workers. Since most of the low wage workers are black, or immigrants who are a minority, then this move will favor a lot of people who actually need this help.
While many people argue that the role of a minimum wage job is just to support entry level workers who are mostly teenagers working part time to support themselves, the reality is disappointing. Most of the minimum wage workers aren’t teenagers but people ranging from 25-55 that also have children with them.
Hence, feeding an entire family on a minimum wage is quite difficult. Hence, having a decent minimum wage should be the top priority of any government. There are both pros and cons and the employers need to evaluate and asses all the arguments before increasing the minimum wage.
While the minimum wage has been increased from time to time, it has zero effects on the people receiving its benefits. This effect has been reduced because of inflation. If you consider the rate of inflation, then it hasn’t actually been raised since the 1980’s in the USA. Hence, a minimum wage program must be monitored from time to time.
Various countries have different systems to analyze and evaluate it given to their citizens. While some countries do it each year, some even do it twice a year and review whether it needs a change or not.
In various countries it is tied to the inflation and is increased accordingly. It is mainly done by a group of people that can range from financial experts, economic planners and union leaders.
But in the USA, it’s neither changed every year nor is done by the economic experts and we don’t know whether it’s good or bad. It could be changed every year and at the same time it could remain same for a decade. The decision to change it is also done by the politicians itself and not by the experts.
Although there are some countries that don’t have any such concept but surprisingly India has a minimum wage act which was passed in 1948 and dictates the amount of minimum wage given to every employee but this is India where rules and regulations don’t mean anything and even if they mean anything, then they are often not followed.
At a time when India is going through a recession and massive 45 year high unemployment, its young population desperately needs jobs but after the 2020 pandemic, things have only gotten worse and people are ready to work at whatever wages they are given.
Hence, even if an employer doesn’t give the minimum wage, they won’t sue him legally because of 4 reasons which are as follows:-
- They don’t even know that there is such a law regarding minimum wage
- They won’t sue them because filing a court case takes more than 20 years to get solved
- They don’t have the money to file the case
- They desperately need that job and if they file the case against their own employer, then they will be fired from the job. A loss that they can’t afford as of now.
Conclusion
What do you think about this program that was enacted to ensure the dignity of every employee? My opinion is that it’s a good thing but it should be reviewed from time and time and must be formulated by the financial and economic experts, not just by the politicians.
It should be tied to inflation so that the increased wage actually makes sense and all the arguments must be considered and evaluated before increasing it. What we so far discussed was from the viewpoint of the government or the economy but what does it has to do with you? What can you gain or lose something from it.
If you really want to grow as an individual, then we would like to recommend you that never depend on the politicians or the government to increase it. If you depend on them, then your future is controlled by them.
What you must do is to create as much value as possible in the marketplace and create a name for yourself. Don’t allow the government to dictate what you’re worth and how much some employer will pay you on an hourly basis.
Instead become so valuable that you can set your own asking price as per your desire. While you may hope for $15/hour wage, there is someone who is earning $1,000/hour. He’s earning a thousand bucks not because the government said so but because people are willing to pay him.
If you’re young, then thinking about the it isn’t a bad idea but as you progress in your career and life, it’s better to depend on yourself and become valuable rather than depend on the government and stay at the bottom of the hierarchy.
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