What are three (3) reasons why minimum wages would benefit  a country and three (3) reasons why they would not benefit a country?

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Ashley Kannan | Middle School Teacher | (Level 3) Distinguished Educator

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Most of the attributes and detriments to the minimum wage arise out of economic theory.  Those who are opposed to the minimum wage mandate usually come out of a classically liberal theoretical position.  For such individuals, the mandate of a minimum wage takes away from the free market. When the government establishes a minimum wage, it takes away from the freedom of the marketplace to determine value.  In setting artificial costs, nations that depend on the marketplace suffer because the free market is not entirely free.  The level of control that is exerted on the marketplace detracts from nations being able to turn to the marketplace as the source for generating income.  Another reason why some believe that the minimum wage is a bad idea is because they feel it hurts businesses.  Especially in terms of small businesses, the establishment of a mandated minimum wage hurts profit margins and ends up creating another external intrusion on the nature of business development and growth.  In establishing another control on businesses, nations that need small businesses to help generate growth and development will be impacted by the establishment of the minimum wage. Finally, some believe that the mandate of a minimum wage would actually decrease job creation:

As a jobs program, raising the minimum wage is a real loser.  Congress raised the minimum wage 10.6% in July, 2009 (know of anyone else getting a raise then?).  In the ensuring 6 months, nearly 600,000 teen jobs disappeared, even with nearly 4% growth in the economy, this compared to a loss of 250,000 jobs in the first half of the year as GDP growth declined by 4%  Why?  When you raise the price of anything, people take less of it, including labor.  The unemployment rate for teens remains unacceptably high.   Workers of all ages that are relatively unskilled are adversely impacted by this policy.

When a nation is in need of jobs and job growth, some believe that establishing a minimum wage would end up doing more harm than potential good.  Raising the price of labor and the costs needed to facilitate it would take away from other potential sectors where jobs could be created.  For example, in order to offset the costs of enacting a minimum wage, some businesses might not be able to remain economically viable.  In this light, nations that depend on work and jobs, and are dependent on their citizens to find such work, would not be best served with the establishment of a minimum wage

On the other side of the equation would be how some believe the need to establish a minimum wage.  One argument why a nation would want to have a minimum wage would be for economic competitiveness.  Workers who work with a minimum wage would be able to generate some type of economic incentive for physically and mentally demanding work.  One need only look at the advent of industrialization and some aspects of globalization throughout the world to see why a minimum wage is needed.  Simply put, many believe that if a worker leaves it to businesses to determine wages, their needs will not be met because of the desire to establish profit motives more than anything other consideration. Those who work at positions which would necessitate a minimum wage do so because of a particular need.  Ensuring a minimum wage makes such needs a bit easier to manage.  It is for this reason that the need to establish a minimum wage is essential.  In addition to creating a working class that has some level of economic competitiveness, another reason why some nations might want to establish a minimum wage would be to ensure that businesses do not believe they have the opportunity to do whatever they please without some type of government regulation.  Nations that have seen corporations and businesses act outside of the interests of the general welfare have not found themselves in the best of political and economic positions. When corporations act for their own interests and not in the interests of something larger, challenges for nations arise.  Establishing a minimum wage might assist in ensuring that corporations and businesses continue to act in the name of profit motives as well as ensuring that their efforts feed into something larger.  Finally, in trying to guarantee that younger workers join the workforce, a minimum wage is essential.  Younger workers need a minimum wage in order to generate some level of wealth creation, even at the youngest of workable ages.  A minimum wage can help in this endeavor and would be much more desirable than not having a minimum wage.  In this way, a nation might feel that a minimum wage could be seen as a good thing.

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arcummings5's profile pic

arcummings5 | High School Teacher | (Level 1) Adjunct Educator

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3 reasons why minimum wages would benefit a country:

  1. Employees working at minimum wage would earn more, allowing them to spend more money to stimulate the economy.
  2. Employees earning more money will likely be more satisfied with their jobs and in turn, produce more quality work.
  3. Employee to employer relations would be more positive.

3 reasons why minimum wages would NOT benefit a country:

  1. If employers are forced to pay their employees a certain amount, they will be able to hire fewer people, meaning higher unemployment rates.
  2. We are paying people more when their quality of work has not increased, positively reinforcing lower quality work.
  3. If people can make more money at remedial jobs, people will be less enticed to pursue higher education, making our society less focused on knowledge and research.
lorrainecaplan's profile pic

Lorraine Caplan | College Teacher | (Level 1) Educator Emeritus

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An additional rationale for raising the minimum wage, particularly in a time of recession, is to boost consumer spending.  The United States is a consumer-driven economy.  If we do not spend, the economy stagnates or even shrinks. The recovery from the recession has resulted in a lower unemployment rate, but many of the jobs do not pay as well as those people used to have, and thus, they have less disposable income, resulting in fewer consumer purchases.  Setting a higher minimum wage means more spending and a concomitant expansion of the economy.  There is a ripple effect to this, as well.  This manifests particularly for young people, who during the recession have stayed in their parents' homes and postponed marriage and children.  With higher wages, they will rent apartments, buy homes, get married, and have children. That means more rental units and homes will be built and more baby strollers will be needed.  People will need their own curtains, refrigerators, and ovens.  Economists may disagree about whether raising the minimum wage will result in fewer or more jobs, but there is no question that people will spend more money. 

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