Minimum Wage and Living Wage Laws
In my opinion, minimum wage and living wages ought to be eliminated because the two affect the elderly, minorities, and teenagers in adverse ways (Bonello & Lobo, 2015). The high unemployment rates amongst minority communities are a testament to the adverse effects. By eliminating the minimum wage, a GDP increase would follow since every unemployment increase of 1% results in a 2-3% fall in GDP (Speltzer, 2009; Bonello & Lobo, 2015). Historically, several economists, their political persuasions notwithstanding, are of the opinion that minimum wage laws though well-intended, tend to be counterproductive when it comes to improving low-wage workers’ well-being, especially when compared to other policies such as the expansion of the Earned Income Tax Credit. When an organization deems that an employee is unproductive so as to warrant the mandated higher wage, such an employee may become jobless or even not hired right from the onset (Kreider, 2019).
Suppose minimum wage laws aim to reduce poverty, even where it could be viewed as effective. In that case, the laws are perceived to be less efficient in targeting compared to policies that are designed to subsidize poor households’ income in a direct way, for example, via tax credits, including expansion of Earned Income Tax Credit, or through in-kind transfers such as subsidized health insurance and food assistance. While the public may perceive that such programs are costly and yet an increase in the minimum wage would appear free, measuring true cost is complicated compared to measuring the cost of running a program; an increase in the minimum wage is not free. Hence, it would make better economic sense to remove the laws and focus on other programs to reduce poverty (Kreider, 2019). The best option, in my opinion, is to empower people to run small businesses by offering tax incentives. This would increase job opportunities and create economic growth (Köehler, 2009). ‘Made in America’ should increase with incentives and with more goods being exported.
Bonello, F., & Lobo, I. (2015). Taking sides: Clashing views on economic issues (16th edition). p. 214-218
Köehler, G. (2009). Job Creation: The Long-term Growth of Employment, Normal, and Abnormal. New York: Nova Science Publishers, Inc. Retrieved from https://search-ebscohost-com.ezproxy.ccu.edu/login.aspx?direct=true&db=nlebk&AN=243027&site=ehost-live
Kreider, B (2019). Iowa State University: Department of Economics. What would happen if the minimum wage laws were repealed? Would businesses pay their employees a penny an hour? https://www.econ.iastate.edu/node/712
Speltzer (2009). Should living wage laws and minimum wage laws is eliminated? https://economicissuesandpublicpolicies.wordpress.com/
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2.5 Should Minimum Wage and Living Wage Laws Be Eliminated?
Read the case study from our Taking Sides text in the Session 1 Readings entitled: “Should Minimum Wage and Living Laws be Eliminated.”
For healthy economic growth, we want as many people employed as possible in our domestic economy! But when minimum wage is raised, companies trying to keep their costs down and their profits up often must lay off workers to pay higher wages to the workers left. Articulate in 1-2 paragraphs your point of view on this issue. What is the most effective way to promote economic growth while providing for minimum wage workers? Remember that GDP and economic growth have both a Consumption component, and a Business Investment component!
Support your position with one to two sources
Bonello, F., & Lobo, I. (2015). Taking sides: Clashing views on economic issues (16th edition).
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