The minimum wage is the lowest salary that is legally acceptable to be paid by the employer to an employee. Equally, workers also have a price floor below which they cannot sell their labor to an employer. It is vital to note the fact that the federal government introduced the minimum wage in the year 1938 within the Fair Labor Standards Act (Kaufman, 2016). In this particular low, employers were for the very first time required to pay for the overtime work offered by the employees. At its inception, the minimum wage of the United States was set at $0.25 per hour, which is about $4 based on the 2012 dollar value (Kaufman, 2016).
Minimum wage comes with various economic pros and cons. On the economic pros, minimum wage increases the purchasing power of the low-income households, especially when it is increased. With an increased minimum wage, the activities within the economy increase hence raise the GDP of a given nation as more people make investments and spend on the consumption goods and services. Therefore, minimum wage is good for the companies themselves since more of their goods get increased demand.
Delegate your assignment to our experts and they will do the rest.
However, minimum wage has also its economic cons, which include high cost of labor for the companies that employ the low-income workers. This increased cost of labor, especially when the minimum wage is raised by the government makes doing business in a given nation quite expensive (Zavodny, 2014). Consequently, some of the multinational companies decide to close shop and shift to other countries with low cost of labor. Losing the multi-national enterprises from a given nation takes away the revenues.
Getting rid of the minimum wage would lead to poor pay for the low-income workers. It is vital to note employees are always looking for ways of minimizing the cost of labor. Therefore, such a move would provide the chance for employees to offer very poor wages to their lowly-paid workers.
References
Kaufman, B. E. (2016). Adam Smith’s Economics and the Modern Minimum Wage Debate: The Large Distance Separating Kirkcaldy from Chicago. Journal of Labor Research , 37 (1), 29-52.
Zavodny, M. (2014). Who benefits from the minimum wage—natives or migrants?. IZA World of Labor .
