Question

No man can be a good citizen unless he has a wage more than sufficient to cover the bare cost of living” (Teddy Roosevelt, August 31, 1910). Recently both the Federal Government and the States are pushing hard to increase Minimum Wage to $10.00 per hour. Do you think setting a minimum wage is a good thing to do?

Answer 1

Setting a minimum wage is a good thing to do largely because it reduces the exploitation of workers to bare minimum. However, the bigger question is regarding the amount of this minimum wage i.e how much? or should the government increase minimum wages as it can have its own pros and cons.

• Arguments against minimum wages

1. ​Some people argue that setting minimum wages is a job destruction program as it is not always easy to comply by such norms (especially when wages are set too high). So, the factories would rather rely on other factors of production (mainly machines) and lay off workers. However, the empirical evidences are not conclusive.
2. It leads to inflation.
3. It reduces the competitiveness (cost advantage) of US goods in international markets. Hence, the exports become unattractive in global markets. But this is not entirely correct because USA already exports high skilled requiring goods. It does not compete with goods that use low skilled workers.

• Arguments in favor of minimum wages

1. ​Improves the welfare of workers.
2. Reduce the dependence on government schemes and help in poverty alleviation programs.
3. Increase demand of several goods that are used by working class.
4. A number of studies suggest that higher wages incentivise employers to invest in new technonolgy to use expensive labor more effectively.
5. Simpler and easy to enforce rather than relying on wage subsidies.

To conclude with what Roosevelt said, "true individual freedom cannot exist without economic security and independence. Necessitous men are not free men" aptly summarises the whole point regarding minimum wages.