The Effects of Increasing the Minimum Wage - Article Example

College Summary Zeynop Ton in an article, A Minimum-Wage Hike Could Help Employers, Too, that appeared in the Harvard Business Review delves deep into the implications of President Obama’s state of the nation speech addressing the minimum wage in the country. Ton explained some of the effects of increasing the minimum wage to include eating into the profitability of businesses, an increase in prices of commodities as a response to reduced probability, affecting the operational quality because of reduced head count of employees. However, Ton observed the effect of increasing the minimum wage would surpass the three effects (wages quality and quality). The most critical factors in a business that would be affected by the policy would include activities that the wage earners have to perform to earn their wages. The factors to be affected in the business as Ton observed include the motivation of the workers, their productivity, customer service and their contribution to overall continuous improvement in the business. Ultimately, these factors are critical in ensuring high performance in businesses, and affect how the business will compete in the market. Moreover, Ton noted there are different upcoming types of businesses, which have managed to thrive in their operations while at the same time offering low wages and good jobs. These companies follow what Ton termed as the “good jobs strategy”. Such businesses manage to offer lower wages, ensure a proper blend of empowerment and standardization, operate with a higher degree of slack and even do cross-train, which Torn suggests, is the way forward if businesses have to cope with increased wage bills. On the other hand, Lowrey Annie in an article, Minimum wage increase would have mixed effects, C.B.O report says, that appeared in the New York Times predicted a positive outcome of the wage reduction. Though Lowrey argued the move could reduce employment by about 500,000 jobs, minimum wage increment would end up lifting more than 900,000 families from the poverty level. Moreover, Lowrey stressed the implementation of the policy could end up improving the lives of more than 16.5 million low-wage workers. However, Lowrie predicted mixed effects in the proposed wage bill increment. An important view in Lowrie’s argument is that while more republicans opposed the increment of the minimum wage terming it as an attempt to kill jobs, more democrats supported the increment arguing that it would reduce poverty levels in the country. All the same, there is a common feeling that increasing the minimum wage would burden businesses and employees and may even lead to job cuts as businesses strategize to reduce costs and maintain their profit margins. The effects of increasing the Minimum Wage Increasing the minimum wage would have a huge positive impact not only in changing the lives of the lowly paid employees, but also in alleviating poverty levels in the country. Most of the workers to benefit from the minimum wage levels would be in informal employment where job security is low. Some of the people in the minimum wage bracket also do qualify to benefit under the governments welfare programs. The governments welfare program is designed to ensure every citizen meets at least the most basic human needs, which may not be possible when depending on the minimum wage alone. Therefore, increasing the minimum wage would help in alleviating poverty, in the country, and reduce government spending in welfare programs to support the poor, which will ultimately lead to reduced government spending. Increasing the minimum wage bill to a decent level would help in alleviating poverty, in the country. Lowrie (par 1) argues that implementing the proposed increment of minimum wage from $7.20 to $ 10 per hour would eventually lead to a loss of more than half a million jobs by the year 2016 as companies adjust to reduce their recurrent expenditures. However, Lowrie noted that despite the predicted loss of jobs, increasing the minimum wage bill would eventually lift more than 900,000 families from poverty and increase the incomes of more than 16.5 million low-wage workers. This suggests that though there are fears among businesses executives about the impact of increasing the minimum wage bill; the increment has a much higher benefit to the countrys poor, which might not be overlooked in favor of business executives. The government has a role to improve the quality of life for its citizens and ensuring every citizen meets their essential needs at the lowest cost possible. As the figures indicate, the government in proposing to increase the minimum wage seeks to improve the lives of the many Americans, some of whom depend on welfare programs to survive. Therefore, ensuring that more people earn a decent pay would improve the quality of life and reduce poverty levels in the country, as more people will have some disposable income to meet their basic needs. Increasing the minimum wage bill would significantly reduce the government’s expenditure. Currently, the government spends a huge part of its budget as welfare to support poor families, in ensuring they meet the most basic needs such as food. Most of the beneficiaries of the welfare program are within the minimum wage bracket, which suggests that the wage is not enough to sustain basic needs. The policy seeks to increase the minimum wage from a mere $7.2 per hour to $ 10 per hour. In other words, the government has an obligation in improving the quality of life and ensuring that every person benefits by receiving a decent pay that would facilitate meeting of the most critical human needs. The difference between the existing low wage limit and he proposed one, though small, would make a huge impact when considered as an annual income. The improved income may push a good number of people from the welfare bracket. Improving the lives of a good number of people to make their income sustainable would reduce the government’s expenditure on welfare making the money available other important use. An increase in the minimum wage would lead to increased innovation and new and better ways of doing business. Ton (par 2) examines the new advanced approaches that businesses have embraced to deal with increasing wage bills and the need to improve production and quality. In a study of Marcadona, the largest supermarket chain in Spain and QuikTrip one of the largest convenience stores chain offering gas station service, ton noted innovation of new and better ways of doing business and named it the "good jobs strategy.” The above two businesses among others have embraced smart ways of doing business, which is a perfect blend of excellent operational choices and ingenious ways to invest in people. The advanced ways of doing business involve offering less pay, ensuring standardization and empowerment in the workplace and operating with a good degree of slack. Through the application of these strategies, the businesses have managed actualizing and transforming their heavy investment on employees to improve performance while at the same time reducing operational costs, improving the productivity of employees and having a fully committed and able workforce to deliver the objectives of the business. Therefore, an increase in the minimum wage levels would not necessary lead to reduced profitability and high wage bills in companies. On the contrary, it would lead to a culture of innovation resulting in better productivity, reduced costs and quality of service to customers, in addition to satisfied employees. This finding negates the widely held concept that the minimum wage increment would lead to reduced profitability and increased prices as businesses pass the additional costs to consumers. Having such innovative minds in a business would not only lead to improved productivity, but would also facilitate utilization of better production technologies and approaches that would reduce the overall production costs. The result of reduces costs would be reduced process to customers, which will lead to an influx of affordable in the market, increase the rate of consumption and improve the quality of products. If many businesses embrace such high level of innovation, such innovations may lead to growth of the economy. Higher minimum wage would make low-wage workers have a higher bargaining power by raising their disposable income in the market. Lowrey (par11) noted that higher minimum wage would help in increasing the spending of lower income workers in the economy. A higher pay would translate to more disposable income for the workers than their earlier pay. Consumers with more disposable incomes have a higher bargaining power to influence the decision of producers in the market and have a stake in the economic development. Therefore, increasing the minimum wage would not only alleviate poverty, but would also ensure that workers have a higher voice in influencing production of goods and services, which is necessary in improving the quality of products in the market. Consumers with more disposable income also do attract many producers and business players. As a result, there would be increased market activities in areas inhabited by low-income workers, which would lead to economic growth and improvement of infrastructure in these areas. As the C. B.O report indicated, increasing the minimum wage bill would increase the total pay of low-income workers by up to $31 billion dollars and help in constructing an economy that works for all people (Lowrey, par 8). Such a huge amount of cash, when ejected in the economy, would have a heavy impact in developing the economy through infrastructural development, ensuring increased consumption and other benefits. Raising the minimum wage, therefore, would be the surest way to deal with poverty and spur development in the country. However, despite the benefits that would be reaped from an increase in the minimum wage, some critics of the policy stress the negative effects that would result from such an increment. For instance, the republicans have argued that rising the wage ceiling would lead to an end of more than one million jobs, which affects a group of people who needs much help in the economy (Lowrey, par 7). The republican senators such as Senator Mitch McConnell of Kentucky vehemently opposed the policy by claiming it was the surest way to make a million Americans lose their jobs. Moreover, other opponents of the policy have argued that some businesses would be squeezed by the increment of the minimum wage leaving them with no option but to increase the cost of their goods and hire much fewer low-wage workers than before. In other words, the policy would affect the plight of the same people it was designed to address. This suggests a rigid mentality in the market that companies have to pay low wages to remain profitable on the long run. As such, these arguments do not take into consideration the plight of the low-wage workers and their ability to sustain a decent life, but have their interest in the profits margin that companies stand to make from low-wage workers while at the same time insisting on their input to improve profitability. Though some business would be affected leading to reduced profitability and reduction in the number of low-wage employees in the market, increasing the minimum wage would have bar far, more benefits that outweigh the above worries. Ton, in a study of two companies in Spain, portrayed that companies can still perform to a great success while still maintaining a satisfied, happy and productive workforce with low wages. Moreover, the Congressional Budget Office, in responding to republican opponents of the policy explained that the effects of the minimum wage increment had been exaggerated regarding the number of jobs to be lost. Furthermore, economists that are more liberal have shrugged off the debate on the implications of raising the minimum wage level by remarking that the debate was neglecting a major benefit: that millions of lives would be improved by implementation of the policy in eradicating poverty and ensuring most people earn a decent wage. A policy that seeks to increase the minimum wage would be a strategic way to reduce poverty levels. Moreover, the policy would ensure that most people earn a decent pay that would facilitate better living standards. However, there have been opponents of the policy dwelling specifically on the impact of the policy on job losses. On the other hand, increasing the minimum wage may not necessarily lead reduced profitability, but might be a revelation to innovation of better methods in running a business. Therefore, the benefits of increasing the minimum wage outweigh the limitations of such a policy; the policy would have a huge positive impact on the economy of any country. Work Cited Lowrey, Annie. Minimum Wage Increase would have Mixed Effects, C. B. O. Report says. The New York Times. Feb 18, 2014.http://www.nytimes.com/2014/02/19/business/mixed-results-in-us-study-of-increasing-minimum-wage.html?_r=0. March 9, 2014 Ton, Zeynep. A Minimum-Wage Hike Could Help Employers, Too. Harvard Business Review. Jan 28, 2014. http://blogs.hbr.org/2014/01/a-minimum-wage-hike-would-help-employers-too/ March 9, 2014. Read More