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Over a long time, there has been a debate on whether to increase the minimum wage or not. Increasing the minimum wage may be beneficial to the employees, but it comes at a cost. Businesses will respond in ways which will make businesses operate profitably. The option of fighting poverty by increasing the minimum wage to $15 is a completely useless method of fighting poverty because it leads to catastrophic effects on the economy and unplanned effects on the poor, less-skilled, and young workers. These strategies will definitely hurt the economy and the people’s way of life. Raising minimum wage is not good because it increases the level of unemployment and raises the cost of living.

Raising the minimum wage will increase the level of unemployment. It goes without say that increasing the minimum wage to $15 will compel businesses to dismiss good millions of employees, something that would raise the already alarming unemployment levels (Addison, Blackburn and Cotti, 2013). If the wages are increased, the production costs will definitely increase meaning the prices will be higher. High prices will reduce the quantity of goods and services demanded hence forcing companies to retrench workers and reduce the hiring levels. From demand and supply, increasing the minimum cost of labor will lower the aggregate demand for labor causing unemployment level to skyrocket (Clemmitt, 2016). This will hurt the chances of young and less educated workers. Poor people will become poorer. Customers may not be willing to pay more just because a company wants to increase the pay for their employees. If the goal of increasing the minimum wage to $15 is to reduce poverty, then we are left asking why it should hurt the very same poor people. It is the poor people who stand to lose jobs as a result of retrenchment. The poor will be the ones who will be hit heavily by the effects of inflation and increase in the cost of living standards. Raising the minimum wage for entry level workers will make businesses to lay off workers aggravating the problem of unemployment. Businesses will consider the use of robots in place of men. This is good for the robotics companies but not a good idea when a state is trying to fight poverty.

Raising the minimum wage will create more disposable income and, thus, increase the cost of living. As cited earlier, increasing the minimum wage would increase the cost of production and, hence, the price of commodities. This inflation would serve to increase the cost of living (Schmitt, 2013). For instance, raising the minimum wage to $15 would raise the cost of housing because landlords believe tenants have more disposable income and, hence, are willing to pay more (The Sovereign Investor, 2014). Consequently, increasing the minimum wage would increase the tax obligations and reduce employee benefits. If the minimum wage is increased, then welfare spending also increases because the products price will increase. When the minimum wage is less than $10, an individual is eligible to enroll in Medicaid and pay less for health care. Conversely, when the minimum wage increases beyond $10, the individual is no longer eligible. What this means is that a good number of citizens will be removed from the Medicaid programs because their income will over to apply the Medicaid programs, and will end up paying more out of pocket for health care. The price of commodities depends on cost of production, labor, and infrastructural costs. In addition, if the minimum wage in increased, the poor will be forced to pay more for goods, services, and facilities such as housing, making life unbearable.

In conclusion, we can say that increasing the minimum wage is not a good idea. As cited above, it is a move which would cost a large number of employees their jobs and make it hard for young employees and less-skilled workers to source employment. Most employers would not accept to pay employees more than the value of products they produce, and the only option would be to lay off workers. Increasing the minimum wage would lead to more disposable income and hence inflation will set in, increasing the cost of living. In a nut shell, increasing the minimum wage would do more harm than good. We need to turn to other options of reducing poverty. It is a bad idea to focus on minimum wage laws. It would be more effective if the government considered of wealth distribution. The government should use its power to make sure that all citizens get sufficient and equitable share of the wealth created by free markets. If this does not work, then the government should allow the free market to determine resource allocation, social surplus, and hence determine the best wage bill. It is thus prudent to say that increasing minimum wage does not help fight poverty in any way, but only serves to add extra financial pressure to the vulnerable low paid workers.

References

Addison, J. T., Blackburn, M. L., & Cotti, C. D. (2013). Minimum wage increases in a recessionary environment. Labour Economics, 23, 30-39.

Clemmitt, M. (2016). Issue: Minimum Wage Minimum Wage. Retrieved from

file:///C:/Users/hp/Downloads/minimum-wage.pdf

Schmitt, J. (2013). Why does the minimum wage have no discernible effect on employment? Center for Economic and Policy Research, 22, 1-28.