The minimum wage was introduced as an effective strategy of achieving social justice and controlling poverty and unemployment. The first minimum wage was established in the United States more than one hundred years ago. However, economists did not support this innovation. Moreover, nowadays many scholars claim that the effectiveness of the minimum wage is doubtful. They argue that instead of decreasing the rate of unemployment and poverty the minimum wages contributes to the development of these negative economic phenomena.
Thus, at present the effectiveness of minimum wage is very disputable. There are many economical, political and moral arguments for and against the minimum wage. It is necessary to add that this measure becomes less popular each year. Nevertheless, while considering the effectiveness of the minimum wage it is important to point out that it is helpful for the society especially when it is supported by other social measures since it secures the rights of workers and solves a number of social problems.
The major economic argument against the minimum wage is that it contributes to the development of unemployment among the most “vulnerable” groups of workers such as low skilled, young, female workers since they cannot compete with skilled workers who are likely to get a job (Cunningham 3). Thus, many economists argue that the most vulnerable groups of workers have less job opportunities. However, the minimum wage can be a good stimulus for young people to continue their study instead of joining the “labor market”, and this is very good for the development of society since it leads to the higher rate of educated people in the “labor market” (Cunningham xiv).
Another economic argument against the minimum wage is that it contributes to poverty increase. Some economists claim that the majority of workers who gain the minimum wage are young people who live with their parents and do not really support the family (Waltman 15). Thus, people who really live in poverty do not get support from this social measure and, basically, the minimum wage does not reduce the poverty but contributes to its development. However, there are still a lot of workers (especially in developing countries) who have to support themselves and their families, and thus have to rely on the minimum wage. The minimum wage is especially helpful for the developing countries since many groups of workers can be secured by the minimum wage (Cunningham 3). There is one more argument suggested by opponents of the minimum wage. They argue that the minimum wage often has “adverse longer-run effects on wages and earnings” and can lead to inflation (Neumark and Wascher 7).
Thus, when higher minimum wage is introduced the spending power of people increases, and this leads to the rise of prices, and this is the conventional pattern for the development of inflation (Waltman 15). However, this argument cannot be regarded as the crucial one since many factors influence the increase of inflation which should be regulated. Basically, it is possible to state that the existence of money contributes to the development of inflation, but this assumption is unlikely to cause money abolishing. The points mentioned above are the major arguments against the minimum wage.
However, there are many arguments for the minimum wage. It is possible to point out the major ones in order to prove that the effectiveness of the minimum wage cannot be underestimated. The first argument is more political than economical and it is concerned with the reduction of poverty (Waltman 13). The minimum wage can be regarded as one of few strategies which are effective in terms of poverty reduction that “requires no commitment from taxpayers” (Waltman 13). Thus, the state does not need to finance this social measure, since the major responsibility lies on employers. One more economic argument for the minimum wage is that it increases productivity since employers are interested in the development of their human resources (Waltman 12).
Thus, workers get training, the productivity increases and, as a result, more jobs appear, and this leads to the development of society. Of course, the minimum wage also increases purchasing power of people is also good for the development of economy. Apart from economic arguments for the minimum wage there are many moral arguments (Waltman 9). The major moral argument for the minimum wage is that it secures justice in the working place.
Workers can be sure that they get fair salary for their labor. Employers will not be able to make use of workers’ hardships. Another moral argument is as follows: the minimum wage helps reduce poverty and secure that the least protected groups of people will not starve. Finally, it is possible to provide the moral argument for the minimum wage which “is concerned with democratic citizenship” (Waltman 11). Thus, people should have equal rights and the necessary economic opportunities to “exercise their political rights and obligations responsibility” (Waltman 11). Apparently, the minimum wage is an effective measure which secures justice. On balance, it is possible to conclude that though the effectiveness of minimum wage is very disputable, there are too many arguments supporting its exclusive role in the development of societies. So, it is impossible to underestimate the importance of this social measure.
Cunningham, Wendy V. Minimum Wages and Social Policy: Lessons from Developing Countries. Washington: World Bank Publications, 2007. Neumark, David, and William L. Wascher. Minimum Wages.
Cambridge, MA: MIT Press, 2008. Waltman, Jerold L. Minimum Wage Policy in Great Britain and the United States. New York: Algora Publishing, 2008.