Should+there+be+a+minimum+wage?

Some statistics Minimum wages around the world Income inequality World's wealth distribution Global income distribution
 * Vocabulary exercise **



Figures published by the OECD (2015) indicate that the income gap between the rich and the poor is at its highest level in 30 years, with the highest 10% of earners making almost ten times more than the lowest 10%. Figures like these have recently ignited the debate over the minimum wage, and whether or not it is a useful tool in helping low income families achieve a higher quality of life. Milton Friedman, one of the most famous economists of the 20th century argued against it, suggesting that “… people whose skills are not sufficient to justify that kind of a wage will be unemployed.” (cited in Patton, 2014). However, more recently the debate has swung the other way, with arguments put forward for the advantages of the minimum wage. 

One of the common ideas put forward is that an increase in the minimum wage will result in more money being spent in the economy, which will have positive effects on the economy as a whole. This argument is based on the premise that a higher minimum wage would result in lower income families spending more money. This would in turn mean an increase in businesses’ sales, which would result in economic growth and increase in the number of job opportunities. And so the cycle would continue. The OECD (2015) appears to support this argument when it points out that economic growth in OECD countries as a whole was negatively affected by 4.7% between 1985 and 2005, a period characterized by an increase in inequality. This would suggest that increasing the minimum wage would have a positive effect on economic growth as a whole.

However, is this really the case? Would increasing the minimum wage really increase economic growth? To investigate this issue let’s consider the case of the United States whose minimum wage is $7.25 (NCSL, 2015). Patton (2014) argues that if the minimum wage was doubled to $15 and these employees spent all their extra income, the effect on the country’s GDP would be only 1.25%. This is not a very significant amount, especially given that this would only be the case if all extra earnings were spent. This would be surprising as it is unlikely that lower income households would spend all extra income.

<span style="font-family: 'Times New Roman',serif; font-size: 16pt;">T<range type="comment" id="559402151_8">he argument then for an increase in the minimum wage appears to have little support from an economic perspective. Not only would it have little positive effect, but in fact it may have a negative effect as businesses try to protect profit margins by cutting expenses, which could involve job cuts leading to further increases in inequality.</range id="559402151_8">


 * <span style="font-family: 'Times New Roman',serif; font-size: 16pt;">References **
 * 1) <span style="font-family: 'Times New Roman',serif; font-size: 16pt; line-height: 1.5;">NCSL. (2015, June 30). //<span style="font-family: 'Times New Roman',serif; font-size: 16pt; line-height: 1.5;">State minimum wages //<span style="font-family: 'Times New Roman',serif; font-size: 16pt; line-height: 1.5;">. Retrieved from National Conference of State Legislatures: @http://www.ncsl.org/research/labor-and-employment/state-minimum-wage-chart.aspx
 * 2) <span style="font-family: 'Times New Roman',serif; font-size: 16pt; line-height: 1.5;">OECD. (2015). //<span style="font-family: 'Times New Roman',serif; font-size: 16pt; line-height: 1.5;">In It Together: Why Less Inequality Benefits All. //<span style="font-family: 'Times New Roman',serif; font-size: 16pt; line-height: 1.5;"> Paris: OECD Publishing.
 * 3) <span style="font-family: 'Times New Roman',serif; font-size: 16pt; line-height: 1.5;">Patton, M. (2014, November 26). //<span style="font-family: 'Times New Roman',serif; font-size: 16pt; line-height: 1.5;">The Facts on Increasing the Minimum Wage //<span style="font-family: 'Times New Roman',serif; font-size: 16pt; line-height: 1.5;">. Retrieved from Forbes: @http://www.forbes.com/sites/mikepatton/2014/11/26/the-facts-on-the-minimum-wage-increase/

=<span style="font-family: 'Times New Roman',serif; font-size: 16pt; line-height: 1.5;">Critical Thinking Exercise = <span style="font-family: 'Times New Roman',serif; font-size: 16pt; line-height: 0px; overflow: hidden;">