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Pros and Cons of the Minimum Wage

written by: Vikas Vij•edited by: Ronda Bowen•updated: 11/22/2010

Learn about minimum wage pros and cons to understand the impact minimum wage has on your business and on the economy at large. By understanding the pros and cons of minimum wage law, you can help to make the way your company handles minimum wage stronger.

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    Pros and Cons of the Minimum Wage

    Minimum Wage Law The minimum wage law in the United States has been a subject of heated debate for several years. Corporate houses and economists have expressed their views about this law at various national forums, and the minimum wage pros and cons in terms of how they hurt businesses have been discussed at length in public. Some people tend to have extreme views about this law, one way or the other, but perhaps the truth lies somewhere in-between. The following is a compilation of the minimum wage pros and cons, which presents both sides of the argument in a rational manner.

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    Minimum Wage Pros

    • There is a strong view shared by several economists that minimum wages promotes economic equity in the country, and allows for a fairer distribution of wealth. In absence of a law, the forces of free economy can lead to exploitation of workers.

    • The second important point in the minimum wage pros and cons list is that an absence of a minimum wage law will lead to more unemployment among the adult population. Teenagers and students may be willing to work for extremely low wages, which will benefit nobody else except the business organizations to make them richer.

    • The removal of minimum wage law may have a cascading effect on the overall wages in the economic system. The larger sections of working population are bound to suffer from its long term ramifications, where as the wealth of a few large employers is going to expand.

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    Minimum Wage Cons

    • Minimum Wage law is seen to work against low skilled employees, teenagers, trainees and interns, university students and part time workers because their job opportunities get curtailed due to this law.

    • Business efficiency suffers in competition to other countries with low wages. This results in offshoring of U.S. jobs and creates unemployment within the country.

    • Very small businesses find it difficult to survive in the economy because they cannot afford to pay the minimum wage stipulated by the law. It obstructs their chances of growth and thereby hampers the economic growth in the larger context.

    • Large employers suffer not only because of poor cost efficiencies but also because they are subjected to higher taxation. Employers are required to match the social security contributions of employees, which goes up because of the minimum wage. There are additional costs borne by the employer such as the Medicare tax. So market competitiveness is compromised in a global arena against low-cost producing countries.

    An objective evaluation of the minimum wage pros and cons can lead to better answers in the larger economic interests of the country.

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