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There are plenty of arguments for abolishing the minimum wage. You will read about plenty of people stating that a minimum wage means that there will be fewer jobs available. There are plenty of social/moral justice arguments in favour of keeping it. But what people forget is that there are economic arguments in favour of a minimum wage.

The minimum wage does prevent employers from hiring certain people to do certain jobs.

This is true, but misleading. Having a minimum wage does of course reduce job opportunities, without the minimum wage businesses can employ people for very little money. Thus they can employ people to do relatively 'unproductive' work. In that the work they do is not worthwhile if the employers had to pay them more (i.e. a minimum wage). Thus a minimum wage will reduce the number of jobs overall.

However certain jobs will be below the minimum wage, but will be worth the employer raising the salary of the employee after the introduction of the minimum wage. THis is because employers pay the minimum they can- dictated by market forces. Thus certain jobs are very 'productive' but are poorly paid because there is no shortage of labour to do them. A minimum wage increases the wage of these jobs.

Thus to sum up a minimum wage means (in the short term) there will be fewer jobs, but these jobs will be better jobs for the employee. And certain jobs will be better paid with a minimum wage than without.

Yet there is another side to the minimum wage. Economic growth is sustained by the continued 'investment' from people. When people are worried about poverty etc they do not spend money, they save it. This does not help the economy. Extremely wealthy people do invest, but a lower proportion of their wealth than others. This is because they have too much money to spend.

People who earn less than the minimum wage (assuming its set at an appropriate level) do not earn enough to invest and sustain economic growth. Thus a minimum wage increases the number of people who earn enough to sustain economic growth- through investments. This sustained economic growth means that there will be more jobs in the long run. So the economic argument against the minimu wage doesn't hold true in the long run.

Learn more about this author, Raymond Kennedy.
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