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Minimum Wage Term Paper


In her article “Minimum wages” Linda Gorman speaks of the influence of minimum wage laws on the lives and career opportunities of employees. She provides numerous examples of how harmful wage regulation can be to the workers, especially those who are lower-skilled. In fact, I believe she is right, because although minimum wage regulation is aimed at supporting and protecting employees, it paradoxically deprives people of their right for work and freedom of choice in terms of what labor opportunities to pursue.

Despite the initial aim to improve the level of wages for the most vulnerable part of workers – the unskilled – this type of regulation has numerous negative consequences. Linda Gorman in her article “Minimum Wages” provides an apt remark that: +“…the law is simply one more example of good intentions producing hellish results”. The problem with the minimum wages setting is that this action does not guarantee work places for everyone. On the contrary, employers might prefer to fire some employees not to pay the burden of high wages.

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First of all, the minimum wage regulation prices the unskilled employees out of the labor market, because it is more financially sound to pay higher wages to skilled workers. This leads to the increase of unemployment level. In particular, according to an economic survey published in an article of American Economic Review in 1978, +“ninety percent of the economists surveyed agreed that the minimum wage increases unemployment among low-skilled workers”. Even if workers are willing to work for less, they can not find jobs because the employers are obliged to follow the minimum wage laws. The situation might be worsened by the labor unions’ aggressive reporting of violations.  Therefore, if you are an unskilled worker and are willing to improve your knowledge and skills in certain occupation to be able to mount the economical and the career ladders in future, you will find numerous obstacles on your way. The employer would rather hire a skilled employee to pay him this wage. Thus, minimum wage laws may cause unemployment and deprive laborers of having a job they choose to.

Secondly, minimum wage regulation may result in the elimination of on-the-job training. Therefore, even if you are an unskilled laborer who is lucky enough to get a job that guarantees a minimum wage earning, you will most probably face that your employer has cut the OJT costs. This basically means you were luck was in getting a dead-end job. To most unskilled workers, the trainings are much more important than the financial stimuli, because OJT provides an opportunity to climb the career ladder much faster in the future. According to Gorman, the minimum wage laws +“consign some of the unskilled to a lifetime of reduced opportunity”. Therefore, it shrinks the number of career choices one may pursue, and thus deprives individuals of the freedom of choice.

Another alternative that might balance the increase of minimum level of wages and have negative consequences on the life and job opportunities for the employees is the option of substantial cuts of fringe benefits. According to Linda Gorman, paid vacation, free room and board, inexpensive insurance, subsidized child care, and much more are also +“important elements of the total compensational packet for many low-wage employees”. Depriving the employees of this sometimes vital opportunity is ineffective and sometimes even harmful. Professionals in the spheres of management and HR are perfectly aware that monetary incentives are not always efficient and employees need to feel more secure in the company they work for. That is why most companies prefer providing both monetary and non-monetary stimuli. Minimum wage laws reduce the value or even completely eliminate the fringe benefits, which does more harm than good to the disadvantaged employees.

Nowadays, the minimum wage law leads to paradoxical situation, e.g. when charity organizations like Salvation Army are obliged to pay the minimum wage to voluntary participants in its work therapy programs, disregarding the facts that Salvation Army is a non-profitable charity organization, the participants work on a voluntary basis and receive weekly stipend and up to ninety days of food, shelter, and counseling in exchange for processing donated goods. Thus, Linda Gorman concludes that, though the logic is strange, workers actually +“have the right to remain unemployed but not the right to get a job by selling their labor for less than the minimum wage”. The minimum wage laws deprive individuals of their basic rights of having a job they want at a price they are willing to work for.

The minimum wage regulation does not solve the problems of unemployment and poverty. If it did, why not to set the level of minimum wages even higher than they are? But such changes would almost surely have negative results. Wage regulation tends to balance the increase in monetary incentives with the cut of the non-monetary ones. It also might encourage employers to choose the option of searching for additional cost cutting opportunities like: substituting skilled workers for unskilled ones, part-time jobs for full-time jobs, foreign labor for domestic labor, and machines for people. Any of the given options will do more harm than good to the disadvantaged category of employees.

To conclude, one must admit that the initial incentive to protect the low-skilled workers fails to bring the expected positive results and moreover, does more harm than good, pricing this category of workers out of the labor market or leaving them no career opportunity further on. Workers should have a freedom of choice in matters like what career to pursue, what levels of earnings to have and what benefits to choose.
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