What are the pros and cons of minimum wage and should it be abolished? The minimum wage has been around for a long time and is designed to protect the rights of workers, although it has been a much debated topic over the years.
By setting and enforcing a minimum wage, the government is ensuring that workers are less likely to be taken advantage of by unscrupulous employers. However, many critics of the minimum wage system believe that a minimum wage is incapable of supporting a worker and actually harms the economy. So what are the pros and cons of minimum wage and can it really protect the rights of workers in this uncertain economic climate?
What are the pros of minimum wage?
- Setting a minimum wage ensures that employers cannot unfairly discriminate in favour of illegal immigrants and teenagers who might be prepared to work for less than an adult with a family to support.
- In countries where no minimum wage is in force, employers abuse the labour market and many workers cannot afford to make ends meet on the wages they receive.
- Establishing the minimum wage forces businesses to share a portion of the profits with the workers who make such profits possible.
- A minimum wage is usually set above the poverty line, so any rate of pay that is less than the minimum wage will not be enough to live on.
What are the cons of minimum wage?
- Large companies forced to pay the minimum wage to their employees in the home market are far more likely to outsource some of their operations abroad because they can pay foreign workers much less, which is detrimental to the economy on many levels.
- Enforcing the minimum wage for all jobs means that there is far more competition for even the most menial of jobs, and therefore students and those with few marketable skills are more likely to struggle to find a job in an ever increasingly competitive job market.
- Many economists believe that the minimum wage hurts the economy by reducing the number of jobs on offer.
- Minimum wages are more costly to small businesses and non profit making organisations such as charities as these are the least able to afford the cost of implementing a minimum wage for their employees. In some cases, a minimum wage can even drive smaller companies out of business.
- Removing the constraints of the minimum wage means less illegal immigrants will take the lower paid jobs and therefore more tax revenue is generated by the working population.
- It is very difficult to set a fair minimum wage in larger countries since the cost of living will vary considerably depending on which area the population lives in.
- Setting a minimum wage can lead to increased mechanisation in the manufacturing industry as the cost of installing and maintaining machines is cheaper than paying the minimum wage to employees.
- The minimum wage makes it harder for home grown and local businesses to compete against foreign companies who have the benefit of cheaper labour costs.