The Pros and Cons of Minimum Wage
Every worker or laborer should be compensated for their effort in behalf of their employer. By agreeing to work on a specific task, they are entering an agreement with the employer or business owner that they will do the said task and they will be compensated based on what was agreed. However, there is a question on how much should a laborer earn or what should be the compensation in exchange for the work they did in behalf of their employer. An employer could grant exorbitant salaries for their employees but they are not allowed to go below what is stipulated. The stipulation that indicates the least amount a worker should earn is referred as minimum wage.
Early Development of Minimum Wage
The first country to enforce the minimum wage law is New Zealand. Since New Zealand started this law in 1894, countries around the world followed suit in creating laws on how much should a laborer earn. The reason for setting up minimum wage law stems from existence of sweat shops. Laborers in sweat shops work for many hours in one day (usually more than eight hours) but their efforts do not receive enough compensation. More often than not, those who work in sweat shops do not complain because they are already living in poverty.
But the government wants their citizens to slowly improve their way of life. As a result, they have pushed for minimum wage law. This allows those who work in sweatshops to earn a lot more. They can use the funds they receive as compensation for their work to slowly get out of poverty. This will also give the workers more time at home or expand their capability as they can go into other ventures while at work.
Advantages of Minimum Wage
Minimum wage does not only come as an immediate financial relief for low income workers. There are also long term effects minimum wage could foster which will ultimately help the country develop economically. If this law is properly enforced, employees will have more money to spend. This increases demand for specific products and/or services. In gist, the economy will improve as more people will have access to funds that they can spend for personal enjoyment, consumption and other personal preferences. The business that provides the minimum wage will ultimately enjoy the consumption as more people will order their products.
Another advantage for minimum wage is productivity. A person who cannot support their family with a low wage will not feel any form of motivation because their efforts do not have any tangible and immediate effect. On the other hand, employees who are justifiably compensated will work harder because they have to preserve the job they have since it can sufficiently support their family.
The government will also enjoy advantages when the minimum wage is enforced. Since more people are working with enough salary to support their family, the government will no longer have to spend more money in social welfare and other related services. The money will naturally focus on other services such as education and security.
Another long term effect for minimum wage is community security and safety. Unemployment is one of the biggest factors that could endanger a community. Because they have no source of income or if their income is not enough, they could resort to illegal activities. Criminal and dangerous activities could be curbed if people are enjoying their work and earning enough for themselves and their family.
Disadvantages of Minimum Wage
There are also economic experts against the minimum wage. They argue that small businesses ultimately suffer more compared to large businesses. Since their earnings are limited, they could post losses instead of earnings since their earnings are focused on salaries instead of improving their business. Small businesses who suffer losses will ultimately close down. Thus, minimum wage will simply cause increase in unemployment because small business venture is more costly.
Another disadvantage caused by minimum wage is that industries will slowly experience operational problems. Since more money has to be spent on salary and wages, development slows down. This will ultimately, result to unemployment and poverty.
There are also those who argue that their minimum salary is actually way better than their output. There are companies that are against minimum wage because the labor they require is very simple and doesn’t require additional knowledge or training. Instead of posting earnings, they lose more because of the simplified work of their employees.
Alternatives to Minimum Wage
Those who oppose the minimum wage have provided alternatives which could still provide financial remuneration to workers but with minimal financial effect on the employer. One of the proposed alternatives is the “basic income alternative”. This is form of social welfare services wherein the employer is free to offer any wage but the government will also provide basic income which should be enough for the family.
Another proposed alternative to minimum wage is the refundable tax credit. This will give the workers a chance to receive financial aid from the government as the tax rates of their earnings will ultimately result to negative tax credit. This means they will receive tax refund instead of paying the government on taxes.
There are also countries that practices CBA or collective bargaining agreement instead of minimum wage. The industries themselves are in-charge in pushing for the minimum wage and this can be enforced with the agreement from the workforce.