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Each country adopts its laws regarding the minimum wage for the local population in order to stop the exploitation of workers. In fact, these laws establish the line that cannot be crossed by employers who legally hire other individuals. The majority of countries had adopted regulations in the context of minimum wage by the end of the past century. However, there are still some regions with nonexistent minimum wages. When it comes to the U.S., its minimum wage was introduced in 2009 for the last time. As a result, numerous experts support the idea to increase the American minimum wage, as it has been significantly impacted by inflation in the past decade. On the other hand, opponents of this idea highlight that such kind of implementation will force business representatives to hire fewer people and slash growth plans. Nevertheless, the minimum wage should be increased in the U.S., as this intervention can address longstanding racial and gender inequities, reduce poverty, as well as fuel economic growth.
General Overview of the Problem
Minimum wage plays an essential role in terms of the overall economic state in the country or the region. New Zealand, Australia, and the United Kingdom were the first countries to introduce laws related to the minimum wage. In turn, the American government enacted similar regulations in 1938 for the first time (Grossberg & Sicilian, 2004). These laws have been regularly updated with the purpose to comply with the process of inflation. In 2009, the national minimum wage in the country was equal to $7.25 per hour (Cengiz et al., 2019). At the same time, it has not been updated for over 10 years, which is why there are numerous debates based on the idea to determine whether this rate should be increased. For instance, Barack Obama attempted to increase the minimum wage in the country in 2014. Simultaneously, this initiative stalled in Congress. Since then, no updates were introduced to this law.
In spite of the fact that numerous states presently pay more than the national minimum wage, this element of the economy is still perceived as a considerable political issue. The current minimum wage is not equal to a living wage, as the full-time worker earns approximately $15,000 per year (Bureau of Labor Statistics (BLS), 2020). As a result, low-wage employees do not have the opportunity to meet their needs from the perspective of healthcare, households, and nutrition. Moreover, taking into consideration that minimum wage is below the poverty line, Americans earning $7.25 per hour are likely to suffer from homelessness, inadequate child care, and unsafe neighborhoods.
Addressing Long-Standing Racial and Gender Inequities
One of the main reasons why it is tremendously essential to increase the minimum wage in the U.S. is to address long-standing racial and gender inequalities. In fact, there are still considerable black-white wage gaps across the whole country. For example, this rate has reached approximately 15%, whereas it was equal to 10% in 2000 (Litman et al., 2020). In other words, wages of representatives of the white race increase at a higher speed than wages of African Americans. It can be explained by the fact that this minority group is mainly occupied in the areas of retail, accommodation, and foodservice. Considering that individuals involved in this business earn less than representatives of information technology, professional services, and financial services, considerable racial inequalities exist.
When it comes to gender discrimination in the workplace, it can also be considered a significant social problem. On average, females earn 80% of what males earn despite the same educational level and professional experience (Litman et al., 2020). In case minimum wage is increased, nearly 32% of women workers will be able to significantly improve the quality of their lives. Furthermore, African Americans would be able to benefit as well. For instance, around 38% of representatives of the black community would get the opportunity to avoid institutionalized racism in their lives (Litman et al., 2020). In the past centuries, this minority group has been facing repeated violent oppression, codified segregation, legal racial terrorism, and continued occupational segregation. These obstacles to getting well-paid jobs can be reduced with the help of laws regulating minimum wage. Thus, the implementation of interventions regulating an increase in the minimum wage is expected to lower both racial and gender inequality.
Reducing Poverty
The record-long economic growth in the U.S. has helped to lower the percentage of people facing negative consequences of poverty. However, the outbreak of COVID-19 contributed to a sudden increase in the number of Americans living under the poverty line. Consequently, the intention to increase the minimum wage in the country has never been more needed than during the global pandemic. In 2019, nearly 40 million Americans did not have appropriate economic resources in order to experience a minimal living standard (BLS, 2020). There is no statistical data indicating the number of people living in poverty during COVID-19, although it is predicted that eight more million individuals have fallen under the poverty line in the past year. This problem can only be addressed by a complex approach that should include an increase in the minimum wage.
Once the income of low-wage workers is raised, millions of Americans would be able to improve their families real income. As a result, a variety of issues associated with poverty could have been avoided. For example, the financial shift from $290 a week to $600 a week is expected to minimize the effect of malnutrition, limited access to education and healthcare, social discrimination, and exclusion on millions of individuals (BLS, 2020). Additionally, the inability to fulfill basic human needs frequently results in the development of mental health issues, such as anxiety and depression. Hence, if the minimum wage is increased, the poverty rates will be reduced, thereby resulting in the improvement of the overall quality of life. Otherwise, the number of Americans falling under the poverty line due to the global pandemic will significantly increase.
Fueling Economic Growth
In addition to improvement in the standard of living, a rise in the minimum wage is expected to fuel economic growth in the whole country. Both the federal and state government would be able to minimize expenditures on financial aid for low-income Americans. Currently, the local population in the U.S. is offered the opportunity to apply for social help in terms of food, health insurance, housing, and other utilities. In turn, the more people are paid higher salaries, the less financial resources the American government will have to invest in financial aid for poor individuals. As a result, the Raise the Wage Act of 2021 is currently under review, as it is intended to double the hourly minimum wage (Cantwell, 2021). From the perspective of business, this initiative is predicted to result in sparking consumer demand.
Even though there are numerous debates regarding this act on small and large businesses within the U.S., the majority of business owners support this initiative. For instance, based on the report released by Cantwell (2021), around two-thirds of all business owners support the main goal of the Raise the Wage Act of 2021. In fact, they highlight that this initiative is likely to contribute to the development of their business by stimulating consumer spending, helping businesses bottom lines, and growing the economy. Moreover, the professional motivation of workers significantly depends on their salary. Therefore, in case the federal minimum wage is doubled, improvement in worker productivity is expected to be noticed. Accordingly, the rates of employee turnover and absenteeism will considerably decrease. In this way, economic growth can be achieved in a short period of time.
Opposing View
Opponents of the idea to increase the minimum wage frequently highlight that it can result in the use of robots and automated processes by various companies with the purpose to replace service employees. According to people supporting this idea, with the advancement in innovative technologies, scientists have managed to contribute to the development of automation (Bell & Machin, 2018). Therefore, in case representatives of a certain business do not have the opportunity to pay a higher minimum wage for low-skilled service employees, they will likely stop hiring people. For example, innovative technologies have been used by the food industry and the area of healthcare. At the present time, some restaurants in the country use robotic kitchen system acts, whereas some healthcare providers use automated patient check-in systems.
At the same time, it is essential to note that the use of automation is associated with high financial costs as well. In other words, business owners will not be able to save money by lowering the number of workers, as they will still be required to spend financial resources on innovative technologies. Moreover, the money spent on salaries of employees is expected to bring way more positive consequences for business than the use of technological decisions. In fact, highly qualified specialists are less likely to make mistakes than robots. Technological systems usually operate according to the standard algorithm, whereas human beings have the opportunity to adapt to external and internal working environments, thereby reducing the number of potential mistakes and violations (Bell & Machin, 2018). Subsequently, business owners will not be able to replace their employees with the use of robots and automated processes completely.
Conclusion
The federal minimum wage is the factor that has a considerable influence on the economy of the whole country, as well as each individual. American minimum wage has not changed for over a decade, which is why the majority of the local population expresses the need for an update of the minimum amount of remuneration. In turn, the American government is currently reviewing the Raise the Wage Act of 2021 that is based on the idea to double the hourly minimum wage. In spite of arguments provided by the opponents of the idea to increase the minimum wage, this initiative is expected to bring a variety of positive outcomes for Americans themselves and the entire country. For instance, this intervention can reduce poverty, fuel economic growth, as well as address longstanding racial and gender inequities.
References
Bell, B., & Machin, S. (2018). Minimum wages and firm value. Journal of Labor Economics, 36(1), 159-195. Web.
Bureau of Labor Statistics. (2020). Characteristics of minimum wage workers, 2019. Web.
Cantwell, M. Fact sheet: Raise the Wage Act of 2021. Web.
Cengiz, D., Dube, A., Lindner, A., & Zipperer, B. (2019). The effect of minimum wages on low-wage jobs. The Quarterly Journal of Economics, 134(3), 1405-1454. Web.
Grossberg, A., & Sicilian, P. (2004). Legal minimum wages and employment duration. Southern Economic Journal, 70(3), 631. Web.
Litman, L., Robinson, J., Rosen, Z., Rosenzweig, C., Waxman, J., & Bates, L. (2020). The persistence of pay inequality: The gender pay gap in an anonymous online labor market. Plos One, 15(2), e0229383. Web.
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