The minimum wage debate is concerned with when minimum wages should be raised, and has been ongoing because of various concerns associated its impacts and affordability. The minimum wage sets the lowest pay by employers and, therefore, interferes with normal market dynamics in which amounts of salaries are based on a wide range of factors including availability of labor. The main aim of setting the minimum wage is to protect the welfare of the poor workers against exploitation by their employers and lift the social status of the poor in society. The assumption on the socioeconomic impacts of setting minimum wage to the poor is that the higher pay will enable them to afford a decent livelihood.
Also, the minimum pay targets low-skill jobs that are characterized by people from the low socioeconomic classes. However, economists argue that setting the minimum wage is also associated with negative impacts that affect the welfare of the society, because of its relationship with job losses and higher cost of living through high prices of commodities. This relationship means that setting the minimum wage can have both positive and negative impacts depending on labor market dynamics and economic conditions. The minimum wage should be raised depending on the prevailing economic conditions and dynamics in the labor market.
According to Brooks, the minimum wage debate should consider the impacts of interfering with market dynamics and the main purpose of raising minimum wage (26). Market dynamics are the forces that influence supply and demand in the economy, and setting the minimum wage interferes with these dynamics. Brooks argues that “You can’t impose costs on some without trade-offs for others”, meaning that increasing the minimum wage triggers other changes in the market (26). For instance, raising the minimum wage is associated with fewer job opportunities because of problems in justifying higher pay among low-skilled workers. The impacts of market dynamics show that evaluations of the impacts of the minimum wage should consider a wide range of interrelated factors and outcomes. The other point is that raising the minimum wage does not achieve one of its major goals; promoting the welfare of the poor in the society. The minimum wage is viewed as a progressive political agenda in addressing poverty in the society (Brooks 26). But while raising the minimum wage benefits job holders from all social backgrounds, the poor and the low skilled workers are affected by the loss of job opportunities and higher cost of living.
Books arguments are within the requirements of considering economic conditions and dynamics in labor markets. He uses various studies to show that setting the minimum wage is always associated with both positive and negative impacts. For instance, a study on the impacts of the 2007 federal minimum wage increase shows that the move reduced the “national employment-to-population ratio” by 0.7% (Brooks 26). This study shows that raising the minimum wage interferes with the willingness of employers to have a large and costly workforce, and, therefore, a decline in the number of available job opportunities. Another study in 2010 found that only 11.3% of workers who would benefit by raising the minimum wage to $9.50 per hour are from poor socioeconomic backgrounds. Also, studies relate minimum wage limit with increases in the cost of products in the market as employers seek new ways of generating more revenues to sustain higher wages. The poor in the society are more likely to be affected by the higher cost of living since most of the companies that are affected by minimum wage limits target the low-end market.
In the article “Power and Paychecks”, Krugman argues that it is possible to raise the minimum wage without affecting the number of available job opportunities and without increasing the cost of living. Krugman’s argument uses the same standards of market dynamic but results in a different conclusion on the impacts of setting the minimum wage. The argument is that higher salaries are associated with higher productivity because of employees’ motivation and loyalty towards the job. This view means that the employers benefit by raising the minimum wage and thus the cost of its implementation is very low. Krugman demonstrates this view by showing the differences between market performance between Walmart, a company associated with low pay, and Costco, a company in the same industry but associated with high wages (Krugman 24). However, Krugman does not consider the outcome of raising the minimum wage towards the main goal of improving the welfare of the poor. For instance, the argument does not consider the possibility of the companies affected to raise the price of their products in the market and thus affect the cost of living, in their effort to generate more revenues to cover the increased cost of human resources.
In conclusion, there are very many factors that should be considered when making decisions on minimum wage limits. Raising the minimum wage limit interferes with the market dynamics causing a wide range of interrelated outcomes. Since the main aim of the minimum wage is to protect the socioeconomic welfare of low-skilled workers and the poor people in the society in general, the minimum wage limit should not reduce the number of low-skilled job opportunities or increase the cost of living because it would negatively affect the people that it is intended to protect. The argument that the cost of implementing minimum wage limit is low because of increased productivity fails to consider other factors including its impact on the poor. Decisions on minimum wage limit should consider market dynamics and should be implemented when the economic conditions allow employers to support higher wages.
- Brooks, David. “The Minimum-Wage Muddle “. Rhetoric and Writing 200. Costella, 2016. Print.
- Krugman, Paul. “Power and Paychecks”. Rhetoric and Writing 200. Costella, 2016. Print.