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Pros and Cons of Raising Minimum Wage

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A minimum wage is the lowest wage companies can pay workers. The federal minimum wage was raised to $7.25 per hour since 2009. Some states and cities have a higher minimum wage rate than the federal rate. If the federal and state minimum wage rates are different, employees are entitled to whichever is higher among the two.

Labor laws set the minimum wage rate to protect workers from exploitation by the employer. Increasing the minimum wage rate has been a topic of considerable debate with various people for the idea and other against it.



1. Reduces income inequality: It helps in reducing the gap between the rich and the poor in the society and create an incentive for handwork and fairness among the employees. Reduces gender-and race-based income inequality.

2. Contributes to economic growth: Raising the minimum wage gives workers more money to spend and this increases demand for business revenue hence increasing economic growth.

3. Reduction in government expenses: Expenses set aside by the government for social programs to help the poor are potentially reduced. This lowers the tax rates for citizens.

4. Increase standards of living: Increasing the minimum wage rate enable the workers to cover the cost of living and make them more productive thus increasing their standards of living.

5. Increased government revenue: The government will generate more revenue from payroll taxes for social security.

6. Reduces employee turnover: Increasing the minimum wage rate will benefit the business as employees are less likely to leave their job in search of high paying ones. This reduces turnover rate and lowers the retraining cost.

7. Invest in education: Workers who have more money and time can invest in their education and improve their attractiveness in the job market.

8. Create more jobs: Increased wages and spending can raise more demand for certain commodities and this creates job opportunities for others.

9. Inflation: The minimum wage rate is raised in order to account for inflation as more workers will get jobs with higher pay to cater for increased prices.

10. Boost morale: Workers will feel motivated through the high compensation rate for their time and effort in work.



1. The financial burden to business: Raising the minimum wage rate put a more financial constraint to the business by increasing the business-labor cost.

2. Increase unemployment rate: If the minimum wage rate increases, companies will be forced to layoffs workers or hire fewer workers in entry levels and reduce labor cost. This will increase the unemployment rate.

3. Increases outsourcing: Increased minimum wage rate will force companies to outsource employees or move their facilities to countries where labor costs are lower.

4. Raise the cost of living: Raising minimum wage enables workers to pay more for housing and as a result, landlords can raise rental cost leading to increased cost of living and create inflation.

5. Increase automated processes: Increasing the minimum wage rate will force employers to create an incentive of investing in automated processes, machinery, and technology to increase their productivity and reduce human resources.

6. Increased prices: Companies pass the increased wages to consumers by increasing the
prices of commodities to offset the high labor cost.

7. Increased competition: Due to the high minimum wage rate, businesses can only hire few workers and this leads to competition between the workers for the available few jobs.

8. Penalize companies: Companies that are labor-intensive are penalized and those that are capital-intensive are rewarded resulting in a shift in the country’s economic base.

9. Poverty levels: Minimum wage rate hasn’t solved the inflation issue and as a result, many workers with a family of three or four people live below the poverty level.

10. School dropout: High minimum wage could lead to increased high school dropout rate since the students know they will get higher pay without education.

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