Why Minimum Wage Helps the Economy
Introduction Hurts Economy Helps Economy
Economics is the science that aims to optimize the allocation of resources in society. So, if economists came with the term minimum wage, it definitely must have been for a reason. Let us make a brief overview of the justification of the establishment of a minumum wage in the labor market.
Initiate effort
A minumum wage is necessary to promote any effort from the part of workers. Accodring to the efficiency theory, there exists a minumum wage, which workers require before investing any effort. If we look at this tendency, we can bravely state that a minumu wage fuels the economy and lays out the fundamentals of productivity.
An Increase in Minimum Wage would Reduce Poverty
Nowadays the actual welfare reform cause poor families to rely on their savings from low-paid jobs. A minimum wage increase would likely create a positive externality in reducing poverty.
The Federal Earned Income Tax Credit (EITC), a refundable tax credit that supplements the earning of low- and moderate- income workers, is now out of date as the minimum wage has not kept pace with inflation. Indeed, it has not increased since September 1997 which cause minimum wage workers to fall more and more behind each year. If the minimum wage would have kept pace with the rise of living, it would now be over $8.10. The real inflation valu wage in 2006 is now at its lowest point in 50 years.
A minimum wage increase from $5.15 to $7.25 would return the value of full-time work to just above its 1997 level and renew the nation's commitment to working families.
It is also important to mention that an increase in minimum wage would not only contribute to the population living bellow the poverty line, but also the low-income workers in general.
Unemployment
Employment
Provide a comparative basis
Limits capitalistic exploitation
Moderates discrimination
The minimum wage helps secure workers against any sort of discrimination or exploitation. The minimum wage is instated by the the FLSA, Fair Labor Standarts Act, and can be therefore legally enforced.
The minimum wage sets equal employment opportunities which requires employers to give all applicants an equal opportunity to be hired, and helps prevent employment discrimination on the basis of race, color, religion, sex, national origin, age or disability.
