8 Essential Pros and Cons of The Minimum Wage

Minimum wage is a heated topic all over the world. In Japan, the minimum hourly wage is 780 yen or $6.30, and according to Bloomberg, it “is about enough to buy a bowl of noodles.” Although a 2.1% bump was added in 2014, that didn’t help much with inflation. However, a 2.3% increase this year would maybe allow workers to add “an egg or extra slice of pork to drop into their ramen lunch bowl.”

When comparing Japan’s minimum wage with other countries, it ranks lower than that of the United States and Germany. According to Giovanni Ganelli, an economist with the International Monetary Fund in Tokyo, this might just be a driving point for increasing the minimum wage this year. Doing so would aid consumption and push up average pay across the board.

A final decision has yet to be made by officials in all 47 prefectures across Japan as they need to look into local economic conditions before a new minimum wage level is set. The new value is expected to be higher or lower than the 2.3% (which pushed up the minimum wage to 798 yen) reportedly recommended by a central government panel.

Japan isn’t the only country taking a look at minimum wages – the US has as well. Labor unions and activists have long called for an increase in minimum wages in America, and in 2013 the Obama Administration proposed an increase from $7.25 an hour to $9 an hour. The following year, the value was increased to $10 with additional calls for indexing the value to inflation.

Recently though, minimum wages have risen to as much as $15 an hour in several cities across America. In 2014, Seattle was the first one to implement the changes followed by San Francisco and Los Angeles. Early in July 2015, New York increased the minimum wage for fast-food workers to $15 and the University of California intends to do the same for their low-wage employees. Also, the Washington, D.C. City Council will be looking into it as well.

Although a minimum wage is lowest legal amount employers pay to their workers, there are differences in opinion with regards to it. Why is that the case? Here’s a look at two sides of the argument:

List of Pros of The Minimum Wage

1. It provides an incentive to find work
Most of the time, those working in low-wage jobs lack certain skills and others may not have the necessary educational requirements for more technical jobs. As a result, finding a job at a minimum wage market is one of the best ideas for them to earn money and slowly work their way towards bigger goals like getting an education and finding a better job.

2. It offers job security
Workers with minimum wage jobs are at an advantage because they are at the lower end of the pay scale. At the same time, part-time workers who earn low wages can be given full-time opportunities as it helps employers cut the cost of hiring and training new employees.

3. It helps the government
When someone earns even just the minimum wage, they are not making use of that many public services compared to those who are unemployed. In the US, a person who is unemployed is given welfare, rent assistance and food stamps in several states. When people get low-wage jobs, the need for public assistance is reduced and the tax burden on the community and state is also lowered.

4. It allows businesses to be better with budgeting
It’s difficult for businesses to budget their money without a minimum wage. With one in place, small business owners, for example, knows exactly how much to pay employees per hour. As such, they have an idea of how much more jobs they need to create based on budgeting information.

List of Cons of The Minimum Wage

1. It increases unemployment
Experts see the rise in unemployment among unskilled and inexperienced workers. Why is this the case? Experts believe that some businesses are just not willing to pay that much to workers with modest skills. This is a scenario that rings true in the case of many immigrants.

Other than an increase in unemployment, a drop in formal labor force activity (which is where workers work or look for legal jobs) is also expected. Also, a rise in undocumented work among immigrants would be a likely scenario.

Also, in a competitive labor market, minimum wages cause unemployment as companies demand less labor whereas higher wages encourages workers to supply their labor.

2. It slows down job growth
Not all businesses agree with the set minimum wage as they find it too high. For example, in the US, the minimum wage in several cities and states differs. As such, some businesses would opt to relocate or open their enterprise elsewhere.

A minimum wage can also slow down job growth in terms of businesses opting not to hire new employees. Instead, they would ask more production from their current staff.

3. It doesn’t really solve the poverty issue
As mentioned earlier, businesses in areas where there is a high minimum wage value would cut back on the number of workers they intend to hire, as well as their working hours. Some have even argued that those who work for minimum wages aren’t exactly poor as only a few of those living in poverty work at minimum-wage jobs.

4. It doesn’t offer opportunities for personal growth
Most of those who work low-wage jobs don’t have fully flourished skill sets. But their need for a job to support their needs and their family’s leaves them no choice but to get work even for a minimum fee. And usually, those with low-paying jobs are tasked to do very labor-intensive work. As such, they don’t have that much opportunity to learn new skills in order to get a better job. Not every employer would spend for training when they know they can hire someone who can perform a task without training.

About the Author
Brandon Miller has a B.A. from the University of Texas at Austin. He is a seasoned writer who has written over one hundred articles, which have been read by over 500,000 people. If you have any comments or concerns about this blog post, then please contact the Green Garage team here.