Support and Opposition for Minimum Wages

Support Supporters of the minimum wage claim it has these effects: Increases the standard of living for the poorest and most vulnerable in society and raises average.[17] Creates incentive to work. (Contrast with welfare transfer payments.)[18] Does not have budget consequence on government. "Neither taxes nor public sector borrowing requirements rise." (Contrast with negative income taxes such as the EITC.)[18] Minimum wage is administratively simple; workers only need to report violations of wages less than minimum, minimizing a need for a large enforcement agency.[18] Stimulates consumption, by putting more money in the hands of low-income people who spend their entire paychecks.[17] Increases the work ethic of those who earn very little, as employers demand more return from the higher cost of hiring these employees.[17] Decreases the cost of government social welfare programs by increasing incomes for the lowest-paid.[17] Does not have a substantial effect on unemployment compared to most other economic factors [19], and so does not put any extra pressure on welfare systems. Makes it easier for students and others at the bottom of the pay scale to support themselves on a small number of hours, enabling them to train for higher wage positions.

Opposition Opponents of the minimum wage claim it has these effects: Hurts small business more than large business. [20][21] Lowers competitiveness[22] Reduces quantity demanded of workers. This may manifest itself through a reduction in the number of hours worked by individuals, or through a reduction in the number of jobs.[23][24] Reduces profit margins of business owners employing minimum wage workers, thus encouraging a move to businesses that do not employ low-skill workers.[citation needed] Businesses try to compensate for the decrease in profit by simply raising the prices of the goods being sold thus causing inflation and increasing the costs of goods and services produced. [25][26] Increases prices for customers of employers of minimum wage workers, which would pass through to the general price level,[27] which disproportionately affects the prices that poor people pay for goods and services.[28] Not an effective policy for transferring welfare to work.[29] Does not improve the situation of those in poverty. "Will have only negative effects on the distribution of economic justice. Minimum-wage legislation, by its very nature, benefits some at the expense of the least experienced, least productive, and poorest workers."[30] Is a limit on the freedom of both employers and employees. Minimum wage laws make it illegal for employers to pay workers less than the minimum wage. This also prevents workers from being made to provide labor or services for less than the minimum. For example, during the apartheid era in South Africa, white trade unions lobbied for the introduction of minimum wage laws so as to exclude black workers from the labor market. By preventing black workers from selling their labor for less than white workers, the black workers were prevented from competing for jobs held by whites.[31] Businesses spend less on training their employees.[28] Is less effective than the Earned Income Tax Credit at targeting the truly needy, and is more damaging to businesses.[28] Reduces economic growth by skewing factor-choice incentives away from the optimum choice.[32] Increase in offshoring[33] Fewer job options for low wage earners. [34] Encourages high school students to drop-out to become employed.[citation needed] Increase in underemployment.[35] Decreases human capital by encouraging people to enter the job market instead of pursuing further education.[28] Hurts the least employable by making them unemployable, in effect pricing them out of the market.[36] Decreases opportunities for low-skilled workers to gain the training and experience of lower paid positions to move up the wage ladder.[28] Increases the number of people on welfare, thus requiring greater government spending.[37][38] [39] Many minimum-wage earners in the United States are high school or college students, not families, so it does not matter what they are paid. Less than 3 percent of minimum wage earners in the United States were single parents, according to a 1996 report. [40]