The quarter of the worldly population. However, much of

The lowest wage permitted by law or by a
special agreement is a country’s Minimum wage1. With a population of 7.6 billion
people in the world of whom 2.5 billion live on less than $2 a day2. The cost of water in the
United States of America comes up to an average of 1 cent for 1gallon of water
which is quite a proportion of income considering $23. This is the case in a
developed nation. And that too in a nation with the population of 323.95
million4people, according to the World
Bank, which is less than quarter of the worldly population. However, much of
the world is made of developing and less- developed nations with poverty
stricken areas that are more in number than the United States and they live in
harsher monetary conditions thereby making the issue a globally tensing one
that requires immediate attention.

Hillary Clinton, A successful business
woman who stood for the presidential election in 2017 representing the
Democratic Party, in one of the democratic debates, had discussed her view on
the wage floor of $15. Initially, she claimed that if this bill were to pass,
she would “of course” sign it. However, she later claimed that she would prefer
signing a bill similar to the one passed 
on by the New York State which agreed on raising the minimum wage from
$7.50 to $125
according to   .
She said nothing further. This confused listeners and many questioned her
change of mind. She then, in an interview with George Stephanopoulos, a former
white house congressman, Hillary took this opportunity to state her stance on
increasing the minimum wage as clearly as can be stated. She said, “if the
country came out with a legislation (to increase minimum wage) then of course I
would sign it.” She agreed to sign the legislation provided that the country
would check its economic well-being. Clinton had concluded her stance based on
the reference to legislation passed in New York to increase the minimum wage to
$15, surrounding areas to $12 and upstate $12.50, provided that economic
conditions were constantly being assessed. She quoted Bernie Sanders who said
that the legislation was supposed to be considered a model for rest of the nation
to increase its minimum wage6.

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This stance clearly
supports the idea of increasing the minimum wage.  However what is the effect of such a
decision. To establish these effects we can take the case of a dilemma that Los
Angeles, California faced in the month of May, 2015.’The Washington Post’, an
American daily newspaper that is known for its particular emphasis on national
politics, on May 19th, 2015, headlined ‘Los Angeles becomes the
biggest city yet to approve a $15 minimum wage’. A number of economists
assessed the effects of a higher minimum wage and had opposing views on these
effects7.

Mayor Eric Garcetti of Los
Angeles estimated that 542,000 would receive a hike. Researchers from the
University of California-Berkeley, from a study, foresees nominal job losses,
decreasing 0.2% of employment base would be further removed due to the highly
probable 2.5% job growth in the city, annually. The final verdict of the study
was that a higher minimum wage would have more favourable than disadvantageous
effects. Looking at employment is extremely important as it contributes to a
nations GDP which, if grows, has attained a significant amount of economic
growth.

However, an increased minimum wage can
contribute to dissuading employers from employing people, as, naturally, it
will increase their cost of production thereby increasing the price, reducing
demand and causing potential business failure. This was the stance of the
Chamber of Commerce who, inferred from their analysis that ‘Businesses might
choose to locate in the suburbs to avoid pricier labour.’ It estimated 70.000
to 140,000 job losses over the next five years (by
2020) with a third of those losses influencing employees under the age
of 25.

Where is the support for 1st
perspective?

Agreeing to the above perspective is Donald
Trump, the president of The United States of America, representing the
Republican Party had discussed his stance on the topic stating “I would not do
it” when asked if he would increase the minimum wage, in the Republican
Presidential debate. Coherent to this decision was Trump’s desire for the
United States to become more competitive with the rest of the world, in which
case, the minimum wages should be low or nil. According
to the Washington post, in the Republican debate on Fox News conducted November
10th, 2015, Trump voiced out his belief by saying, “our taxes
are too high, wages are too high, everything is too high. What going to happen is
that people are going to start firing people.”8-9

Trump says this in regard to the already
high taxes and wages of Americans that are adding costs to their products. This
would conclude as a high price on a product making the product less competitive
in the international market, since reasonably priced goods are available in the
rest of the market. This would reduce profits of a number of businesses and
increasing the minimum wage would be a disincentive to employers to employ
people which would cause a high rate of unemployment.

There are 9 countries without a federal
minimum wage. These are, Iceland, Norway, Sweden, Finland, Denmark, Austria,
Germany, Italy and Switzerland10. It can also be observed
that few of these nations have some of the lowest unemployment rates. According
to the Euro stat, the unemployment rate of Iceland is 2.8% followed by Germany
with 3.6% then Norway with 4.2% of unemployment followed by Austria with 5.6
and Denmark with 5.7%. These Statistics were provided in an article by Tim
Worstall in an American Business magazine, Forbes. He says that Germany used to
be a country with high rates of unemployment and they overcame the situation
through labour reforms to establish more low wage jobs in addition to providing
subsidies for low wage workers and now their unemployment rate reduced from
11%-12%11 in 1950 to 3.7% from 1980
until the last time it was measured in November 2017 with negligible amounts of
fluctuations, give or take .1. 

As reported by BBC News, in Switzerland , It was planned to establish a
minimum wage of 22 Swiss francs (about $25; £15; 18 Euros) an hour. The minimum
wage proposal was rejected by 76% of voters. Supporters had argued it would
“protect equitable pay” but the Swiss Business Federation said it
would harm low-paid workers in particular12.
Agreeing with this perspective is David Neumark, professor of economics at the
University of California, Irvine. In an interview with Here & Now’s
Jeremy Hobson, he said, “My view of the evidence is that by far the lion’s
share of it suggests that some job loss is from minimum wage increases, and
those job losses as we might expect are concentrated on the very least-skilled
workers.”13

The view
held by this professor figuratively takes on two perspectives. That is, the
view that it affects low skilled people and the second being it only affects a
small, insignificant proportion of people, identified from the tone of what he
says. I believe that it does matter if the minimum wage is affecting the least
skilled workers since they are the vulnerable group of a population. This is
the main reason as to why supporters support minimum wage as they believe that
not only is it based on equity, as per people who need money most, but also
since everyone has enough money to access the basic requirements to survive.

Yet
another problem that comes up due to the absence of a minimum wage, is the
reduction in the supply of labourers. Working and not receiving the money
expected by labourers can lead to an increase in the labour turnover per
company. If this is the case, as labourers are discouraged to stay within the
labour force. This will reduce not only employment, but due to an increased
rate of unemployment there will be lesser output, thereby reducing total
economic growth. For example, in China, Chinese provinces were raising the
minimum wages due to lack of supply of labour. The inland areas of Henna,
Shanxi and Ningxia unveiled an increase of minimum wage from 1,120 Yuan in 2010 to 2,190 Yuan
in 201614.

Additionally,
if increased, minimum wages will increase the cost of production. This
increases the prices of goods which could lead to inflation. A rising level of
inflation goes against a nation’s macroeconomic policy since it will lead to
further unemployment an undesirable economic environment.

A higher minimum wage would reduce government
welfare spending. If
low-income workers earned more money, their dependence on, and eligibility for,
government benefits would decrease. The Centre for American Progress reported
in 2014 that raising the federal minimum wage by 6% to $10.10 would reduce
spending on the Supplemental Nutrition Assistance Program (SNAP, formerly known
as food stamps) by 6% or $4.6 billion15. The Economic
Policy Institute determined that by increasing the minimum wage to $10.10, more
than 1.7 million Americans would no longer be dependent on government
assistance programs. They report the increase would shave $7.6 billion off
annual government spending on income-support programs.

In my opinion, although
minimum wage and employment may not have a cause and effect relationship, such
as a change in minimum wage will lead to s change in the employment rate, I do
believe that there is a correlation amongst the two. And the difference between
the correlation between the two in different nations depending on whether
minimum wage exists or not is significant. The unemployment rate in Germany, a
country without a legal minimum wage, is 3.9% as of August 2017, as per Euro stat,
Bureau of Labour Statistic. The unemployment rate in Gabon is 28% and their
minimum wage is $324er month16. Although
other factors may come into play with the rate of unemployment the pattern
observed and focused on, in this case in the minimum wage.

Considering all fronts, I
believe that a country should gradually reduce its minimum wage allowing gradual
changes and implement a progressive tax system evaluating and implementing
according to the economic conditions at the time. In doing so problems
associated with minimum wages would have a promised reduction to the problems
as it is gradually removed. With that being said, there are many other economic
conditions that contribute to employment rates that need to be evaluated while
decisions on minimum wage are taken since there are countries with some of the
highest GDP such as, Luxemburg, which has a federal minimum wage.

To conclude, minimum wage
influences employment to a very large extent. All said and done, the research used in this essay is limited to
secondary research. There is scope for more research through the means of
primary data, such as through interviews with people on low incomes or on the
minimum wage and their daily spending to maintain a roof over their heads and
to sustain a living. This research will be more up-to-date and relevant data to
come to relevant solution to the problem. If this is carried out globally then
the issue can be solved both locally and globally. (Scope for further research)

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