Question

As the prompt details, the conversation on minimum wage has been present for some time now. Federally, the minimum hourly rate is still $7.25, while locally in Maryland, it is currently $10.10. Other states, such as New Jersey, have enacted plans to gradually increase minimum wage annually, until it reaches a level of $15, more than double the current federal rate. An increase in minimum wage may increase unemployment levels, as some businesses may choose to remove some positions, to keep their wage expenses near previous levels. If businesses choose to keep the same amount of employees, then their profits could diminish as a result. On the other hand, this potential harm to businesses could be counteracted by the benefits to the employees. With more money from their wages, more people may be likely to spend more on goods and services, which would likely aid businesses after all. Another interesting consideration is how an increase to minimum wage could affect the supply and demand curve in the labor market. I'm just throwing out this example. Say you have someone working a very stressful job for $20 an hour, in a state with a $10 minimum wage, such as MD. They continue to work that job because they make double the minimum wage. However, if minimum wage is increased drastically (perhaps to $15), then this person may be happier to work in a less strenuous environment, now that their $20 wage is only one-third greater than the minimum. If more people make a similar switch, then would other job positions start to see an increase to wage levels due to supply and demand? As for my personal thoughts, I think that minimum wage should see an increase. However, it should not be drastic (such as $15 per hour). It can certainly reach these levels over time, but I think a slow, gradual increase is best for employers and employees alike. why do you agree.

Answer 1

Both employers and employees get benefitted by minimum wage increase, but the rate of increase should be slow and gradual.

A sudden and fast increase in minimum wage raises cost of business for employers. In order to adjust the extra expenditure on labor, it has to increase price, absorb some costs, reduce hiring or ask for overtime by the existing workers. So, first of all, the employer needs to be ready with proper strategy to provide a minimum wage increase. It has to monitor the labor cost along with other business related expenses. It needs to inform customers about the price increase, there should be a detailed explanation of reason behind the price increase. Employers need to conduct market surveys to know the impact of a price increase on consumers. It needs to find out the business condition, whether it is able to bear a slight reduction in revenue? In order to absorb the extra cost is it feasible to reduce the number of employees and run the business with fewer workers and increased salary. The employer can ask existing workers to do overtime with an increased minimum wage rather than hiring more workers. So to implement increased minimum wage, the employer needs to think strategically in order to avoid loss. Thus, a slow and gradual increase in minimum wage is best for employers.

Similarly, employees need an increased minimum wage to raise their standard of living. But for teenagers a sudden increase in minimum wage may not be good. It may make them extravagant and sometimes may try to cheat with their performance level. But for adults and experienced employees it may be good to increase minimum wage because it will encourage them to improve their performance level and at the same time make them happy with an improved standard of living. Thus, overall, we can say that a gradual and slow increase in minimum wage is best for employees also.