Written By: Trisha Dandapat
Edited By: Simir Reddy
Low wage workers and supporters protest for a $15 an hour minimum wage on November 10, 2015, at Foley Square in New York, United States.
As of 2020, India has set its national minimum wage at ₹375/day and $7.25 in the US. For a person living a minimum wage job in India, is it enough for them to sustain their family or at least themselves? Is the minimum wage right now enough or should we increase it?
To start with, what exactly is the minimum wage? A minimum wage is the lowest legally paid wage people can work for. This is often decided by the Federal government of a state. The purpose of the minimum wage is to prevent employers from exploiting workers. Although, setting the minimum wage is a balancing act where one has to have enough money to secure a socially accepting quality of life while not being high enough to promote low-productivity.
As every country is different in terms of their labour market conditions, sector distribution, etc. This makes it hard to conclude to a universally accepting wage level. So should the minimum wage be increased or not? I’ll be talking about that here.
Before the discussion, we need to ask ourselves the question for better understanding of the issue- ‘Why do workers need a higher minimum wage now?’ To answer this question simply, this is because living standards are increasing. As living standards increase, the cost of living would increase. One study shows that the $15 wage is not enough for an average worker to live in any of the U.S states.
To start, giving a higher wage to minimum wage workers will ensure them with a good quality of life since they have more money in their pockets. If people have more money, they’ll think about spending more money. If people invest more money in facilities like food and education, they’ll become more productive in the workplace. Overall, it would increase the quality of life, as we see a direct correlation of a generous wage and quality of life. For example, Australia has one of the highest if not the highest minimum wage in the world. Not only that Australia is in the top 5 of the quality of life index.
Adding to that point, if people have more money to spend, they will want to spend that money on a good education for them and their family. This will result in a more educated workforce which will invite more companies to start up and invest in an industry, therefore increasing the economic growth of that country.
Moreover, if workers have more money to spend, they’ll have more purchasing power. So they will be wanting to spend their money on certain goods and services which will increase the demands of certain goods which will stir up economic growth.
Furthermore, not only increasing the minimum wage is beneficial for the worker, but the employer as well. As people get higher wages for the work they do, more people would be interested in doing the same job. This is beneficial for the employer as they can hire more people in the working force. For example, Target is raising its minimum wage to $15 per hour compared to other companies like Walmart whose minimum wage is $11 per hour. Although the primary reason for this is the current coronavirus situation, I think this is a really effective way to recruit new workers. This is because if people choose to work for minimum wage, they’ll be more leaning towards choosing a place which provides a higher paying job.
Although this might be true there are equally valid points, on the other side of this debate, which needs to be taken into consideration.
Firstly, it would increase job outsourcing, as more companies move their facilities to countries where labour wage is lower. This would decrease the job employment in the country, therefore causing economic loss. Moreover, it could raise the cost of living in some areas. A higher minimum wage allows workers to pay more for housing. As a result, landlords could raise rents, creating inflation.
Furthermore, it would cause unemployment as firms are becoming more selective about the people they recruit, the ones which have more experience would get the jobs while the others don’t. This will drive people to go towards welfare. This is a problem in and of itself because as more people switch to welfare, the government has to fund more on them which would cut costs on other government-driven projects.
The final reason is since the minimum wage is not funded by anybody, it would result in bankruptcy for business firms as they are presumably employing resources at the highest efficiency, but as minimum wage increases, these business firms will run into problems like cutting more costs in their quality of products. This would lead them to do any of these 3 solutions like increasing the prices of their products. Though this might work as a short-time solution, this will decrease the number of their consumers, reducing their profits. Alternatively, they’ll be forced to cut costs by recruiting fewer works and switching to capital investments. Although they are going through reduced profits, they’ll not have enough to afford them either. This would result in cutting cost from the wages of their workers hence, exploiting their workers by making them work for less.
In conclusion, I think that increasing the minimum wage is reasonable for the future as it transitions to a more capitalized workforce. With a more capitalized workforce, there wouldn’t be a problem of paying the workers more as some of the workforces are going to be replaced by machinery soon or later in the future.
References -
Layne,R. “$15 an hour: A higher wage, but hardly a living” [online] Available at: https://www.cbsnews.com/news/15-an-hour-a-higher-wage-but-hardly-a-living/ [Accessed on 27 June 2020]
Committee on Education and the workforce democrats. pages 2.[pdf] Available at: https://edlabor.house.gov/imo/media/doc/FactSheet-RaisingTheMinimumWageIsGoodForWorkers,Businesses,andTheEconomy-FINAL.pdf . [Accessed on 27 June 2020]
Nguyen.J “Why Target is raising its minimum wage to $15” [online] Available at: https://www.marketplace.org/2020/06/17/why-target-is-raising-its-minimum-wage-to-15/ [Accesed on 15 June 2020]
https://www.thebalance.com/us-minimum-wage-what-it-is-history-and-who-must-comply-3306209
National Bureau of Economic Research. "Minimum Wage Increases and Individual Employment Trajectories” [pdf],https://www.nber.org/papers/w25182.pdf, Page 5.[ Accessed April 27, 2020.]
Waltman, J.(1998) “Minimum Wage Increases and the Business Failure Rate”
Journal of Economic Issues, Vol. 32, No. 1 (Mar. 1998), pp. 219-223. Available at:https://www.jstor.org/stable/4227285?seq=1 [Accessed on 27 June 2020].
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