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What are the positions on a minimum wage? Show more Show less
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A minimum wage, which sets the lowest legal wage a company can pay its workers, is designed to prevent exploitation. Its backers argue the pros, including guaranteeing low-income workers a liveable wage, outweigh the cons. But who really benefits from a legally mandated minimum wage?

The minimum wage is too low Show more Show less

A higher minimum wage would unlock economic benefits and be far more effective at limiting poverty.
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A higher minimum wage would improve economic activity by adding consumers

Minimum wage has been an issue for years. People who get paid minimum wage don't get to contribute much to the economy. If people can't spend money on anything, the economy can't be poured into. Therefore, a higher minimum wage would boost GDP.

Context

In the United States, the federal minimum wage sits at just $7.25 an hour. Even a modest increase would provide a substantial boost to GDP.

The Argument

In 2013, Senator Tom Harkin (D-Iowa) and Representative George Miller (D-California) introduced the Fair Minimum Wage Act. The bill would have seen the federal minimum wage increase from $7.25 per hour, to $10.10 per hour over the course of three incremental $0.95 increases. [1] Had the bill come into effect, the small wage increase would have injected an additional $35 billion into workers pockets, resulting in a growth in GDP to the tune of $22 billion. Its critics argue that because companies trim non-minimum wage earners’ salaries to pay low earners a minimum wage, this growth in economic activity would not materialize. However, they fail to accommodate the fact that low-income workers are those most likely to spend additional income. Therefore, a minimum wage doesn’t merely reallocate spending, it increases it.

Counter arguments

A higher minimum wage might put money into low-income workers pockets, but it would come at the expense of non-minimum wage earners. If companies are forced to pay the lowest earners a higher wage, they will seek to trim non-minimum wage earners salaries to keep their wage bills in check. Therefore, the implementation of a minimum wage doesn’t increase economic activity, it just reallocates existing economic activity. Higher earners, whose wages didn’t increase (or may have decreased) will spend less, offsetting any economic benefits from increased spending among low-income earners.

Proponents

Premises

[P1] A higher minimum would wage would lead to higher spending. [P2] Higher spending means higher GDP.

Rejecting the premises

[Rejecting P1] A higher minimum wage wouldn't generate higher spending.

References

  1. https://www.epi.org/publication/raising-federal-minimum-wage-to-1010/
This page was last edited on Friday, 3 Jul 2020 at 01:48 UTC

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