Pros and Cons of Minimum Wages - Essay Example

The issue of raising a minimum wage bill in the world has been a very sensitive issue in the developed world. Minimum wages have advantages together with disadvantages. The advantages of minimum wagesEconomic StimulusMinimum wages most often have a tendency to benefit most consumer economies almost instantly due to the rapid increase in trade activities as the employees increase their expenditure because of high wages. Increasing the minimum wage ensures that various employees have more to spend which increases ripples within an economy through more spending.

Control InflationThe minimum wage bill ensures that it increases to cater for inflation. A rise in the minimum wage bill increases the living standard for employees that are impoverished. Therefore, the minimum wage bill must ensure that it keeps up with the current inflation of a country. According to various studies, a gradual rise in the minimum wage bill has a slight effect on the rate of unemployment of a country (Murphy et al. 28).More opportunity for jobsAn increase in the minimum wage bill results in more spending from the workers as well as profit from the various businesses due to more spending.

This leads to increased job opportunities as more employees are recruited to run the expanding businesses that realize more sales and revenues.Reduced Expense for Social ProgramsRaising the minimum revenue of workers can contribute to reducing the amount of expenditure that the government spends on operating social programs. This is because most employees that receive low wages always depend on the government for social support. Increasing the minimum wage bill will empower the workers to support themselves (Neumark and Wascher 64) Support programs aimed at the poor people in the society will also decrease and be diverted to other government programs as well as lower taxes and improved revenue generation that will be collected from taxes of social securities.

Disadvantages of minimum wagesPrice increaseIncreasing the wage bill might force employers to raise the price of their products in an effort to generate sufficient income to be able to support and manage the high minimum wages required by their employees. This can also develop a ripple effect for other businesses that may lead to a high living cost that can encourage the workers to keep asking for a minimum wage increase.LayoffsEmployers that act within their stretched budget can be forced to lay off some of the employees in the organization to be able to remain within the scheduled compensation budget.

Wage increases can prevent employers with a tight budget from compensating a similar number of workers at an increased rate. Therefore, some will not be employed, as their wages will be used to pay the remaining workers.Decreased hiringEmployers may not be able to hire more workers as they cannot be able to hire more employees because of the increased wage bill. The Federal Reserve Bank statistics in the United States examined that an increase in the wage bill by 10 percent reduces employment by a margin of 2 to 4 percent especially those with lower skills (Wilson 12).

Similarly, businesses may opt to outsource workers from other states that may be willing to work with the number of wages that they offer.Competition Will IntensifyIncreasing the minimum wage bill can greatly intensify competition, as people that are more qualified will be attracted t minimum wage positions. This will affect young and inexperienced individuals that may be denied the opportunity to gain knowledge as well as experience and get to establish their resume for entering into the labor force.