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What are the positions on a minimum wage? Show more Show less

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?

A minimum wage is ineffective at reducing poverty Show more Show less

Minimum wage laws do not benefit workers or businesses and are ineffective at combating poverty.
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A minimum wage raises unemployment

Minimum wage policies contribute to increased rates of unemployment.
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Context

Minimum wages increase earnings for those in employment, but they cause job losses which leads to higher unemployment.

The Argument

Minimum wages reduce employment in three ways. Firstly, higher labour costs increases the cost of producing goods or providing services. Employers pass those costs onto consumers in the form of higher prices, which leads to fewer consumer purchases of those goods. Reduced demand, then causes manufacturers and service suppliers to reduce supply, leading to layoffs or slowed job creation. [1] Secondly, higher labour costs prompt employers to accelerate automation. Raising the cost of human labour relative to machines and technology will encourage more employers to automate their workforces, leading to layoffs and reduced hiring. A 2014 study on the impacts of introducing a $15 an hour minimum wage in San Francisco estimated that the measure would lead to the loss of more than 15,000 jobs in the city. [2] Thirdly, as domestic wages increases, companies look to offshore operations to companies with lower labour costs to reduce overheads. This offshoring leads to supply chain relocation, reducing the number of domestic jobs.

Counter arguments

When implemented, minimum wages do not reduce employment. A case study undertaken in 1994 comparing the fast food sectors in Pennsylvania and New Jersey revealed no link between a higher minimum wage and reduced employment. In 1992, New Jersey increased its minimum wage by $0.80 (to $5.05 per hour). Pennsylvania kept the same minimum wage ($4.25 per hour). Contrary to predictions, job growth in stores in New Jersey paying a higher minimum wage was faster than in Pennsylvania. [3]

Framing

Premises

[P1] Minimum wages increase the cost of labour. [P2] Employers employ strategies to recover the inflated costs. [P3] These strategies reduce the volume of jobs and increase unemployment. [P4] As more people become unemployed, more citizens end up in poverty.

Rejecting the premises

Proponents

Further Reading

References

  1. https://www.cbo.gov/sites/default/files/113th-congress-2013-2014/reports/44995-MinimumWage.pdf
  2. https://sfcontroller.org/sites/default/files/FileCenter/Documents/5496-140687_economic_impact_report_final.pdf?documentid=5495
  3. https://www.nber.org/papers/w4509

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This page was last edited on Sunday, 24 May 2020 at 18:26 UTC