The Economic Policy Institute (par. 2) noted that there was a growing momentum in America to increase the minimum wage. The government has various option to execute to achieve a higher minimum wage. This paper focuses on three of them.
The most viable option is to use policy formulation. The current law on minimum wages set it at $7.25 per hour. It follows that the Congress can set up a higher value for the minimum wage. Upon raising the floor for the minimum wage, all businesses are under obligation to follow, and, therefore, would work. However, opponents claim that laws that are against the forces of the market are counterproductive. It follows that in as much as the investors would have to raise the wages, they would have to find means of maintaining their profit margins. For instance, they may hire fewer workers, reduce the working hours of the employees, and hike the prices of commodities (Center on Budget and Policy Priorities). Notwithstanding the drawbacks, the law would achieve its aim and the market would adjust slowly to overcome them.
The second policy would be increasing jobs available in the market such that there is a shortage of labor. When a nation has a fewer workforce than the market demands, there will be stiff competition for workers. As a result, the wages payable to the employee would increase significantly. The government has the machinery to promote the creation of jobs across the nation. It follows that upon letting almost everyone qualified for a job gets one, the high demand of workers would lead to higher wages. There is evidence that some of the firms pay way above the minimum wage to motivate their employees. In this regard, increased competition for workers would lead to increased payments.
However, investors react differently to labor shortages. For example, they may outsource employee from other countries to ease the shortage. As a result, the minimum wage may not rise to significant levels. At the same time, businesses may adopt other means of production such as automation to cut down on the costs of producing goods and services. Consequently, the government may not succeed in raising the minimum wages in this way. In this regard, for this policy to work, the government needs to accompany it with other policies regulating the outsourcing of workers, or automation especially on technologies that are too disruptive in the markets. With such control, the plan would work because it does not disturb the forces of the market like the legal increase of the minimum wages.
The government can offer incentives and enter into mutual agreement with the employers in the form of reduced taxes. Government incentives that lower the cost of running businesses increase the profit margins of the investors. As a result, the employer could transfer the saved amounts to the employees by raising the minimum wages. In this respect, the proposal would work as long as the cost of doing businesses remain low because the investors would be willing to pay more.
However, the idea may not be sustainable in the long run. Government incentives may lead to a significant reduction of the state revenues especially concerning reduced taxation and license fees. As a consequence, the effects may not yield the best results in the long term. However, the government may also collect more taxes from the workers in the form of income taxes. Fundamentally, the higher the pay, the more one pays in income taxes. Therefore, the case of reduced revenues became invalid.
Works cited
Center on Budget and Policy Priorities. "Policy Basics: The Minimum Wage." Center on Budget and Policy Priorities. 30 Apr. 2015. Web. 09 May 2016. <http://www.cbpp.org/research/economy/policy-basics-the-minimum-wage>.
Economic Policy Institute. "FACT SHEET: It’s Time to Raise The Minimum Wage." Raise The Minimum Wage. Web. 09 May 2016. <http://raisetheminimumwage.org/pages/fact-sheet- time-to-raise-the-minimum-wage>.
