Good Effects of Minimum Wage

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By Joe McIndoe
eHow, Nov 13 2010

The federal minimum wage presently stands at $7.25 an hour.

The minimum wage is sometimes a source of controversy, and remains a part of public discourse. The federal government raised the federal minimum wage to $7.25 an hour in 2009, though other states have raised the minimum wage even higher. While the minimum wage has its drawbacks, it offers a number of benefits, too.

Benefits For Vulnerable People

The minimum wage, by nature, aids the lowest-paid workers. Even slight increases in the wage can make a significant impact on the living standards of poor families and individuals, who can better afford basic necessities like rent, food and clothing. The increase in disposable income not only aids low-income workers directly but also benefits the economy with the purchase of goods. Moreover, the minimum wage has a particularly beneficial effect on black and Hispanic working women, who tend to occupy minimum wage jobs at a higher rate.

Benefits For Employers

While the minimum wage might increase labor costs for businesses, employers enjoy important benefits as well. Minimum wage increases in states are correlated with lower rates of absenteeism, higher worker morale, and lower rates of employee turnover. This translates into reduced training costs and higher productivity for employers. Additionally, higher wages draw a more qualified job applicant pool.

Benefits For The Taxpayer

By elevating the incomes of poor people, the minimum wage helps reduce reliance on public assistance programs. Workers whose wages are too low to afford health insurance, for example, must rely on public money for treatment. This, in turn, results in reduced public spending and lower taxes for society at large.

Economic Stimulation

Consider the example of Henry Ford, whose $5 a day wage for auto workers was enough to keep them productive and, more importantly, put enough money in their pockets to buy Ford´s own products. As a report for Let Justice Roll indicates, minimum wage puts more money in the pockets of workers, which boosts consumer spending. Moreover, minimum wage increases in Connecticut and Massachusetts, according to the Drum Major Institute for Public Policy, did not result in higher unemployment, as some critics of the minimum wage assert. 

A Healthy Democracy

Poverty that results from low wages can create a permanent underclass and increase wealth disparity. If the gap between the haves and have-nots is too immense, it threatens democratic values. Extreme differences between the rich and poor are hazardous to a democratic sense of fairness and equaity. Basic democratic exercises such as voting or participating in civic duties become more difficult if people have to struggle immensely just to provide the basic necessities of life.

Keep Pace With Inflation

Inflation erodes purchasing power over time. As prices for consumer goods rise, consumers must dedicate a greater portion of their income to keep pace. Inflation impacts low-wage workers the most, and based on inflation the current minimum wage is lower than it was in 1968 and even 1956. An adequate minimum wage helps individuals and families stay afloat as prices naturally rise, and helps ensure that standards of living increase, rather than stagnate or even erode.

Other Benefits

The tangential effects of higher income have benefits that go beyond plain economics. After California raised its minimum wage, general health among poor people improved and their children were more likely to finish high school.

References

                        U.S. Dept. of Labor: ¨Minimum Wage´´

                        Raise Minimum Wage: ´´The Benefits of Raising the Minimum Wage´´

                        Let Justice Roll: "Fair Wages Help Small Business"

                        Drum Major Institute for Public Policy: "Raise the Minimum Wage"

                        Let Justice Roll: "Raise the Minimum Wage to $10"

Resources

                        Oregon State University: History of U.S. Minimum Wage