Increasing Minimum Wage

Introduction

The idea of increasing the minimum wage among labor markets in various economies remains a popular subject with view and concerns from different and broad perspectives. Proponents of substantial increments in minimum wages for workers in various sectors often base their advocacies and propositions on the need to bring such individuals and their families at par with the ever rising cost of living. Moreover, the workers who majorly include low-skilled and low-income employees such as laborers usually express the need for their entitlement to the achievement of self-sufficiency and protection in labor markets (Belman and Wolfson, 2014). Therefore, substantial and sudden increases to the minimum wage should not occur because they will damage the labor pool and job prospects for new laborers, increases the rate of inflation, and damage the economy

The argument made by Rama (2001) implied that substantial and sudden increment of the minimum wage has a higher likelihood of wreaking havoc to the pool of labor, especially for entrant laborers. Instances of such increments often to result in higher wages compared to the minimum mages set nationally for laborers. In this regard, new laborers will largely suffer because the labor pool will be narrowed thus leading to diminished opportunities. Moreover, the substantial and sudden increment in the minimum wage for laborers could lead to serious challenges because it is unprecedented. According to Belman and Wolfson (2014), new laborers are likely to find themselves in an environment characterized by inequalities and unreasonable disparities thus causing destabilization in various sectors that require the services of laborers. Policymakers in state and federal administrations have previously come up with policies that govern and control the increases of minimum wages for various workers including laborers. Such measures are often put in place by policymakers in governments to avoid the damage that may be caused to the labor pool for new laborers as well as guarding the sluggish economy against more damages. Instead of coming up with substantial and sudden increases to the minimum wage governments and administrations should develop and implement policies that generate a rapid growth of the economy. 

In turn, a stable and growing economy will generate competitive wages thus creating more and better opportunities for new laborers. Laborers prefer offering their services in economic environments that are characterized by high wages. However, governments, organizations, and firms would prefer to hire new laborers when the economic environments are characterized by low wages for workers. In this regard, it is worth noting that the phenomenon of market equilibrium plays a critical role in maintaining a balance when it comes to the conflicting desires that may exist between the laborers and the employers. This allows policy developers and decision makers to analyze the labor market before allowing a strategic increment in the minimum wages for laborers. Job prospects for new laborers could also be severely damaged when the increase to the minimum wage is sudden and substantial. This is because most employers including governments often introduce changes to the composition of laborers when such sudden and substantial increments occur to the minimum wages (Neumark and Wascher, 2008).

Laborers receiving poor wages have always wanted to have an increment in the course of providing their services. However, Kosters (1996) explains that increasing the minimum wage may not be one of the effective ways of eradicating poverty among the laborers especially if the increase is sudden and substantial. This is because the target and strategy employed in that increase do not directly translate into benefits of job prospects for new laborers. The sudden and substantial increase in minimum wage among laborers plays a significant role in discouraging films, organizations and other employees from recruiting the very laborers that it appears to be assisting. Laborers earning minimum wages usually earn that much due to their lack of the requisite experience and skills. Workers with higher skills are often more productive thus they offer services that deserve higher wages. However, when the minimum wage causes employers to offer higher remunerations to laborers, they find themselves substituting more productive and highly skilled workers for laborers who have low experience and skills. 

As such, the job prospects for new laborers end up being jeopardized and lowered to the extent that most of them may be rendered jobless. Considering the decision to hire a lowly skilled laborer for a wage of $8.15 an hour or a more experienced working for a similar rate, employers who include governments, as well as private firms and organizations, are more likely to settle on a more experienced worker. This is due to the increased level of productivity obtained from that particular worker. By deciding to raise the minimum wage for laborers substantially and unexpectedly, governments and other employers make it more difficult and unrealistic for new unskilled laborers to find jobs. This argument is more than just a theoretical one in the sense that previous studies have shown that unexpected and unplanned increase in minimum wages could cause employers con consider hiring more experienced workforce at the expense and to the disadvantage of laborers who are often unskilled (Belman and Wolfson, 2014). 

Flinn (2006) examined the manner in which employment for young people to work as laborers and the way their recruitment changed following the raising of minimum wages. In this regard, the findings indicated that when the minimum wage was raised significantly, more young people who were looking forward to working as a laborer after completing or dropping out of school would be most likely rendered jobless and unemployed. On the other hand, workers with more skills and higher levels of experiences had a higher likelihood of retaining their jobs as well as getting new ones. On the contrary, when employers are not under any pressure to effect or implement sudden and substantial increment in minimum wages, job prospects for new laborers are significantly increased. Other researchers have been able to indicate that some companies in cities like Los Angeles resorted to hiring workers with more skills and a higher level of experience as soon as the city passed a law requiring them to pay their laborers a minimum wage of $8.50 per hour. Further, it has been found that employers in various firms and organizations started employing workers with high skills and experience after the affecting and implementation of the law that required the increase of the minimum wages for workers. The other outcome of the implementation of this requirement was the increase in the likelihood of workers getting jobs as formal workers as compared to those getting jobs as laborers (Kosters, 1996). 

Researchers have also gone to the extent of examining the amount of remuneration earned by workers recruited as laborers. It was found that those recruited after the introduction of a law raising the rate of minimum wage for laborers had their remunerations raised but their job security and prospects considerably lowered. The views by Woods and California (2002) indicate that businesses and organizations are likely to respond to the substantial and sudden increases in minimum wages for laborers by cutting down the number of low-skilled workers majority of who are laborers. An increase in the minimum wage also discourages business and employers from hiring a mix of workers, which plays to the disadvantage of low-income and low-skilled workers. The increase in the rate of inflation and subsequent damage to the economy are other reasons why substantial and sudden increases to the minimum wage should not be taking place. High inflations and damaged economies resulting from this kind of increment in wages would significantly be harmful to businesses and organizations thereby forcing them to close down. More than half of small businesses are likely to be adversely affected by the economic outcomes associated with a sudden or substantial increase of minimum wages for their workers. In that case, most of such businesses are often forced to close down thus also affecting middle-income workers whose livelihoods depend on those businesses. High inflations would lead to an increase in the prices of consumer goods in relation to the substantial increase in the minimum wage for workers in various sectors. For instance, an increase in minimum wage for workers working in food restaurants would see the transfer of the burden of increased labor costs to consumers (Dickens, Machin and Mannin, 1999). 

According to Pollin (2008), those proposing for increases in minimum wages have always argued that the present minimum wage as set by the federal governments is too low compared to the cost of living that is always on the rise. Furthermore, their argument has been that a substantial increment of the minimum wage will stimulate economic growth by ensuring that workers are able to afford their necessities without having to struggle a lot. In this case, the belief is that the decreasing value of the minimum wage among low-skilled and low-income workers is among the fundamental causes of social and economic inequality between the middle-income workers and the low-income workers which lead to slowed growth in the economy. On the other hand, those who are opposed to sudden and substantial increases in minimum wage feel that most businesses and organizations are may not be in a good position to sustain the payment of the increment to their workers. Due to that situation, they end up laying off most of their workers and stopping the hiring of new workers thus damaging the economy by slowing down its growth. In addition, it becomes more difficult for workers with limited experience and skills to find other jobs that would raise their minimum wage and hence allow them to manage the rising cost of living. 

The observations made by Flinn (2006), indicate that substantial and sudden increases to the minimum wage will not only increase levels of inflation but is also likely to increase levels of poverty among low-skilled and low-income workers in the economy. Studies have shown that even though low-skilled and low-income workers consider a sudden and substantial increase in the minimum wage as something that would work to their benefit, the reality is that their employment chances and number of working hours would significantly decline. To that extent, low-skilled and low-income workers would suffer more than their employers. A combined effect of such changes would have a negative impact on inflation as well as the growth of the economy. Furthermore, increase in inflation resulting from a substantial and sudden increase in minimum wage raises the proportion of poor families thus increasing levels of poverty. Neumark and William (1992) argued that higher wages often result in situations where costs of production become high and nearly unmanageable. The corresponding effect of such situation is an increase in the prices of commodities and services thus reducing their demands. Ultimately, the net effect of all these occurrences and situations is something that is not favorable for the majority of households and families that are already impoverished due to loss of jobs and employment.

The perspective brought about by Pollin (2008) indicates that substantial and sudden increases to the minimum wage should not occur because it will damage the economy by reducing the likelihood and probability of the upward mobility. Theoretically, the explanation presented by Rama (2001) indicates that the minimum wage puts away the initial rung in the ladder of employment, and it is that initial rung that offers experience and skills that are required by workers to propel themselves to higher rungs and proceed to desirable levels of their jobs or careers. The low-skilled worker would be the hardest hit by increasing minimum wages suddenly and substantially. This is because the perspective of employers indicates that higher wages are not justifiable for people with low skills. Previous studies have demonstrated that significant increases in minimum wages often result in a corresponding reduction in the average monthly or yearly income for skilled workers as well as middle skilled workers. Moreover, it could also lead to a significant reduction in the levels of employment for both low skilled and middle skilled workers. Ideally, workers whose levels of skills and experiences do not meet certain set requirements would be exposed to economic hardships in the event of the adoption and implementation of the sudden and substantial increment of minimum wages (Rama, 2001). 

Additionally, legislations and regulations that support the implementation of the substantial increase in minimum wages could lead to adverse effects on the economy by resulting in the occurrence of rigidities experienced in labor markets. In turn, this makes it more difficult for workers, especially the low-income earners to rise up the ladder of the economy. Such rigidities may lead to a relative decrease in mobility and could lead to a decrease in absolute mobility moving in the upward direction. The views presented by Woods and California (2002) suggest that when the minimum wage is raised unexpectedly and by a significant margin, then there would be a rapid decrease in opportunities associated with upward mobility in various sectors that heavily rely on a human resource such as the hospitality industry. Furthermore, he agrees that low-income and low-skilled positions in the workforce are entry-level roles that traditionally act as springboards to greater heights when it comes to promotions at work. 

Dube, Lester, and Reich (2010) introduce an interesting perspective to the discussion concerning substantial and sudden increases to the minimum wage by arguing that it should not be allowed to take place simply because companies and industries may be forced to resort to automated systems and robots if they find them affordable and sustainable. Should this happen, it would not just render low-income earners jobless but it would also have adverse effects on the job security of middle-income earners and other employees who depend on this industries either directly or indirectly. Studies have indicated that the advancement in science and technology has continued to eliminate the majority of services that were traditionally offered by human workforces due to issues related to cost as well as the efficiency of service provision. In this regard, most industries have continued to find the use of robots and automated systems reliable and cost effective. For instance, robots are made to perform several simple tasks such as lawn mowing, mopping, gutter cleaning and vacuum cleaning among others. In addition, some industries and sectors have gone the extent of dismissing human services and replacing them with robots when it comes to conducting complex tasks that require high precision, accuracy, and efficiencies such as health care and financial transactions (Woods and California, 2002). 

From a theoretical perspective, the invisible hand theorem presents a description regarding the operations and performance of the participants in labor markets. In this regard, the workers, as well as their employers, often find themselves entangled in the struggle and desire to address their needs and requirements. Some of these needs include substantial and sudden increases in the minimum wage for workers, especially the low-skilled and low-income workers, as well as letting the market forces to determine the minimum wages for employers. Nonetheless, there is a theoretical implication that free and competitive environments for labor markets play a critical role in determining the direction taken by the policies influencing the time and extent of increases in minimum wages for workers. Moreover, most of the programs initiated by the governments with regard to the regulation and control of the labor market are usually evaluated based on their effectiveness to respond to the forces operating in a free market (Neumark and Wascher, 2008).

Theoretically, the forces of a free market economy should be allowed to determine the minimum wages as opposed to the sudden and substantial increases that are often imposed by governments through regulatory bodies and authorities. Previous research studies have been able to demonstrate that the imposition of controls is regulations aimed at raising the minimum wage against the forces of the existing market only serves to cause disruptions to the balance and stability of a free market economy thus discouraging the creation of new and more jobs. As such, it is only appropriate that labor markets existing and operating in free economies should be allowed to determine the minimum amount of wages that should be paid to workers. Moreover, if there is a need for increments, then the free market environment should also be allowed the appropriate time as well as the margin that should take place. Neumark and William (1992) posited that the minimum wages mandated by governments are often based on arbitrary observations and, in most cases, they lack proper and sound cost benefit or economic analysis and evaluation. In contrast, wages increases that are determined by a free market environment have the tendency of reflecting the conditions of demand and supply that are often associated with the operations and performances of markets at local levels. When the market environment determines the extent and the time of minimum wage increments, more job opportunities and employments for low-experienced and low-skilled workers are created at an increasing rate thus profiting the employers as well as the consumers of the products and services produced. 

Conclusion

In summing up, conflicting views exist when it comes to examining whether substantial and sudden increases in the minimum wage result in high inflations or otherwise. Historically, there have been clear indications that have demonstrated that high levels of unemployment in any economy often lead to higher rates of inflation. However, it has also been observed that substantial increments to the minimum wage are more likely to stimulate a positive economic growth because of a situation where the spending power of workers increases due to the increase in their wages. To that extent, substantial increases in the minimum wages would only lead to a reduction in the number of existing for low-income workers or low-skilled workers by about fifteen to twenty percent. When it comes to theoretical considerations, a substantial and sudden increase in the minimum wage forces employers in businesses and organizations to increase the prices of the services and goods that they produce thus spurring the rates of inflation. However, in practice, there are numerous challenges and difficulties associated with sudden or substantial increases in wages. In this case, wages only influence a single section of a service or product whose price is paid by consumers. Thus, it is possible to offset substantial increments to minimum wages through involving workers in the processes of heightening productivities as well as cutting down the number of the work force (Dube et al., 2010).

References

Belman, D., & Wolfson, P. J. (2014). What does the minimum wage do? Upjohn Institute for Employment Research.

Dickens, R., Machin, S., & Manning, A. (1999). The Effects of Minimum Wages on Employment: Theory and Evidence from Britain. Journal of Labor Economics, 17 (1), 1-22. doi:10.1086/209911

Dube, A., Lester, T., & Reich, M. (2010). Minimum wage effects across state Borders: estimates using contiguous counties. The Review of

Economics and Statistics, 92 (4), 945-964. Retrieved from http://www.jstor.org/stable/40985804

Flinn, C. (2006). Minimum Wage Effects on Labor Market Outcomes under Search, Matching, and Endogenous Contact Rates. Econometrica, 74 (4), 1013-1062. Retrieved from http://www.jstor.org/stable/3805915

Kosters, M. H. (1996). The effects of the minimum wage on employment . Washington, DC: AEI Press.

Neumark, D, & William, W. (1992). "Employment Effects of Minimum and Subminimum Wages: Panel Data on State Minimum Wage Laws." Industrial and Labor Relations Review 46 (1):55-81.

Neumark, D., & Wascher, W. L. (2008). Minimum wages . Cambridge, Mass: MIT Press. Pollin, R. (2008). A measure of fairness: The economics of living wages and minimum wages in the United States . Ithaca: ILR Press.

Annotated Bibliography

Belman, D., & Wolfson, P. J. (2014). What does the minimum wage do? Upjohn Institute for Employment Research.

This source is basically concerned with the role played by the introduction of the aspect of the minimum wages in the labor market. This source also presents some insights into the ongoing debate on the effect of unexpected and considerable determination of the minimum wages by the government as well as concerned bodies and authorities. This source is credible and relevant to this study in the sense that it explores different perspectives and arguments about the effects of substantially raising the minimum wage on employment and new job prospects for laborers and other workers who fall into the category of low-income earners and low-skilled employees. Additionally, this source presents an unbiased and comprehensive analysis of the various outcomes and impacts of raising the minimum wage for workers in a wide range of sectors especially those with limited skills and experience. 

Dickens, R., Machin, S., & Manning, A. (1999). The Effects of Minimum Wages on

Employment: Theory and Evidence from Britain. Journal of Labor Economics, 17 (1),

1-22. doi:10.1086/209911

These sources focus on the presentation of information regarding the various ways through which increased the minimum effects employments and job prospects for new workers such laborers, especially whenever such increments are substantial or unexpected. As such, this source is credible and relevant to the topic of this study because it delves deeper into the identification, description, and explanation of the evidence and theories associated with the effects of imposing increments of minimum wages on labor markets and work forces. In addition, this source focuses on examining issues that affect economy such as high rate of inflation due to high levels of increased wages among workers in different sectors. The source presents information regarding the investigation of several aspects of labor market economy. 

Dube, A., Lester, T., & Reich, M. (2010). Minimum wage effects across state

Borders: Estimates using contiguous counties. The Review of Economics and

Statistics, 92 (4), 945-964. Retrieved from http://www.jstor.org/stable/40985804

The focus of this source is the identification, evaluation, and analysis of the effects and impacts associated with the introduction and adoption of the minimum wage across the borders of various states and counties. In particular, this places a lot of emphasis on the review of the statistics, figures, and economics of quantitative research in relation to the impacts of the minimum wage. The credibility and relevance of this source is found in the practicality and effectiveness with which it addresses the debate surrounding the suggestion that that substantial and sudden increases to the minimum wage should not occur because they will damage the labor pool and job prospects for new laborers, increases the rate of inflation, and damage the economy. In addition, this source contains publications whose contents offer information that is relevant in presenting arguments concerning the increase of minimum wage among workers.

Flinn, C. (2006). Minimum Wage Effects on Labor Market Outcomes under Search,

Matching, and Endogenous Contact Rates. Econometrica, 74 (4), 1013-1062.

Retrieved from http://www.jstor.org/stable/3805915

This source presents a review of the information with regard to the effects and impacts of having increments to the minimum wages in the labor markets in both free and regulated environments and economies. Moreover, it explores the empirical and theoretical arguments and explanations touching of the subject area of the minimum wage. The credibility and relevance of this source lie in the fact that it provides an in depth and clear evaluation and analysis of the relationship that exists between different formations of labor markets and the substantial yet unexpected increase in the minimum wage. Furthermore, this source offers a comprehensive coverage of different approaches that are useful in the performance of an empirical to quantitative as well as a theoretical qualitative analysis of various aspects of increasing minimum wage. 

Kosters, M. H. (1996). The effects of the minimum wage on employment . Washington, DC:

AEI Press.

This source generally explores the effects associated with the existence and implementation of the minimum wage on jobs and the hiring of members of workforces at different levels of skills and experience. The author of this source is keen on explaining and elaborating the challenges associated with different proposals that have been put forward to realize substantial increments in wages for workers by the Clinton administration in the United States. The relevance and credibility of this source in as far the topic of this study is concerned is that it provides the necessary information and facts that are important in supporting different arguments and views on substantial and sudden increases in the minimum wages. In addition, the source is also crucial in presenting deeper insights into the actual effects of determining and controlling the minimum wage.

Neumark, D, & William, W. (1992). Employment Effects of Minimum and Subminimum

Wages: Panel Data on State Minimum Wage Laws . Industrial and Labor Relations Review , 46 (1):55-81.

This source contains a presentation of a deeper perspective in relation the manner in which minimum wages for various workers in different sectors affects the status of their employments and engagement with their employers. The credibility of this source is pegged on the fact that places focus on some of the laws and policies governing the involvement by the state in determining and regulating minimum wages as well as the relations and relationships between workers and their respective industries of services. The relevance of this source to the topic of study is evident in the manner in which it provides insight into the concerns associated with the role of governments in determining the extent as well as the timing of minimum wages for workers.

Neumark, D., & Wascher, W. L. (2008). Minimum wages . Cambridge, Mass: MIT Press.

This source gives an indication of the existence of the idea of introducing minimum wages in various developing and industrialized economies around the world. Moreover, it gives an insight into the various pieces of legislations passed by the federal government of the United States and how their implementation has impacted and influenced the labor market for over the years. Furthermore, the authors of this source present different views and arguments that focus on the effects of controlling or regulating minimum wages for workers offering their services in different sectors of a free market economy. The credibility and relevance of this source to the topic of study arise from the fact that it plays a significant role in providing reliable information with regard to the positive and negative impacts of setting minimum wages or allowing it the be determined by the labor market environment. 

Pollin, R. (2008). A measure of fairness: The economics of living wages and minimum wages

in the United States . Ithaca: ILR Press.

This source is about the factors that assist in the determination of fairness and equity when it comes to the questions, views, and arguments surrounding the debate about increasing minimum wages and the living standards of workers. This source is credible and relevant to the topic of study since it provides the information and evidence necessary in supporting wide range views, perspectives and arguments showing the manner in which substantial and sudden increases to the minimum wage is detrimental. Furthermore, this source clearly shows the relationship that exists between the increases in minimum wages and the damages caused by varying the labor pools as well as different job prospects for new workers, increases in the high rates of inflation among several other damages to the growth of the economy. 

Rama, M. (2001). The Consequences of Doubling the Minimum Wage: The Case of

Indonesia. Industrial and Labor Relations Review , 54 (4):864-81.

This source presents the processes and the findings of a case study involving matters of labor and industrial relations in Indonesia. The author uses facts figures and other relevant pieces of information to present a detailed and factual insight into the outcomes as well as the consequences of raising minimum wages for workers by substantial margins. The credibility and relevance of this source are attached to the fact that if offers credible and informative review of the reasons as to how substantial and sudden increases to the minimum wage would damage the labor pool and job prospects for new laborers, increases the rate of inflation, and damage the economy if it was allowed to take place. Moreover, it provides a real and practical scenario of the occurrences that are attributable to a substantial increase in the minimum wage. 

Woods, J. G., & California. (2002). Minimum wages: The economic impact of 2001

California minimum wage increase . Sacramento, Calif.: Division of Labor Statistics and Research.

This source presents the process and the findings of the statistics figures and facts in relation to the outcome and economic impacts of the introduction and enforcement of minimum wage increase by the administration of the state of California in the year 2001. This source is credible and relevant to this study due to the fact that it presents figures and facts that help in demonstrating how substantial and sudden increases to the minimum wage should not occur because they will damage the labor pool and job prospects for new laborers, increases the rate of inflation, and damage the economy. Moreover, this source offers credible information that assists in elaborating and supporting the various arguments that characterize the debate about increasing the minimum wage amongst workers.