The Impact Of Minimum Wage On Poverty Alleviation

Does increasing the minimum wage impacts poverty positively?

The Rise of Minimum Wage and Its Objectives

The topic relates to the aspect of minimal wage of the laborers and whether it will help in alleviating poverty or not. The aspect of minimum wage is a matter of concern no a days due to increase of it by January 2018 in Ontario whereas the second instalment of the increase of minimal wage of workers was expected to occur by January 2019. However, this was not te case due to a change in the government that did not preferred this matter on the very reason that they did not anticipated that an increase in the minimal wage can reduce inequality and mitigate the ill effects of poverty within the country. The initial increase of minimal wage took place with the objective that it is a stronger instrument that have the ability to raise the standard of living of common people that resides in the country bu6 the actual scenario revealed this not to be true. Since, different perspective prevails regarding the increase of minimal wage and its ability to raise people from the economic catastrophe of poverty is questionable. The justification regarding the argumentative aspect of minimum wage requires testing of feasibility upon the rise in minimum wage and its ability to alleviate people from poverty which thus needs to be assessed appropriately and hence demand a pragmatic research on this respect in a significant manner. The minimal wage is good if and only if they are not replacing the labor force for whom the minimal wage is been raised.  

The notion of minimal wage rise may take place due to drive of the market or to make capitalism much more impactful. People needs money for their daily activity purpose that may be related to consumption of goods and services, exchanging commodities, production of new products as well as distribution of them. The common people of the country needs the minimal wage in order to get ensure with the fact that their daily need are being satisfied and they possess the minimum per capita income that will not push them into the vicious circle of poverty. I9nitiawlly the mini9mu wage at Ontario was $ 7.25 per hour while the objective that was accomplished by January 2018 was to pull the minimum wage to 15 $ per hour and it was implemented. However,. The after the change in government rise of minimal wage is not being appreciated and hence is not being accomplished. Rise in the mini9mal wage gives greater opportunity to people since it raises their purchasing power for consumption, production, distribution or exchange of goods and services entirely. Since the purchasing power of the workers have increased hence their ability to buy more goods and services at a point of time will be higher. If there is not the presence of the demanded amount of goods and services by the workers in that case the demand pull inflation will take place due to the affect that the market have to remain at equilibrium but due to higher demands and lower supply the natural affect will be the rise in the price of goods and services. It is been seen that technology i9s replacing the labor force in the disguise of providing higher wage recruiting only skilled labor force and forcing the unskilled labor force towards employment. Temporarily it may impress the working class but in the long run the economy is getting much more destabilized and the inequality within the economy is getting raised. The unskilled labor force are not being trained to enhance their skill levels rather are victimized by mental harassment that others have the ability to enhance their skill and get better jobs with higher minimal wage however they neither possess the skills nor have the ability to acquire those skills and hence they are unemployed though it is not the reality. The ultimate objective of rising the minimal wage is worsening off the worker’s situation in the long run and bettering off the destabilized situation of the economy. It is getting restricted in raising national income only whereas the economy is getting diverted from the path of overall economic as well as societal development and welfare of the workers. In simple terms there is a possibility that exist that the nominal value of the minimal wage can be risen though the actual scenario may be different as the real value of the minimum wage has not risen. The solution to this problem is to create expertise within the labor force so that they becomes irreplaceable by the employers and then the purpose of raising the minimum wage will get substantiated effectively. The thesis statement thus circumscribes the fact that whether or not the increase in the minimum wage is able to provide a significant impact in alleviating the real state of living of the common people snatching them out from poverty or it is just an illusion that is created by the capitalist society to better their relationship with the working class and maintain the worker’s misperception model. Moreover, it should not be the fact that at the name of wage that is provided by the employers to the workers, they should not disguise them in terms of helping the workers with their earnings and earn profit at the cost of the worker’s misperception about the price level. The understanding the relevant articles provides a unique thesis statement regarding the fact that The minimal wage is good if and only if they are not replacing  the labor force for which the minimal wage is been raised.

Different Perspectives on the Increase of Minimum Wage

Outline of Research Paper:

1. 
   Introduction

• Justification
• Thesis statement

2. The Impact of Minimum Wage in Mitigating Poverty

• Historical context of rise in minimal wage and its effect in alleviating poverty
• Benefits of the rise in minimal wage

3. The interest of workers and the employers in rising the minimal wage

• The role of government in implementing the rise in minimal wage
• What are the perspectives of the workers and the employers in increasing the minimal wage
• How the components of minimal wage will impact the poverty level

4. Rebutting the case against understanding the ability of rise in minimal wage to alleviate poverty

• Justification of why it is important not to increase the minimal wage
• benefits of maintaining the minimal wage at a level that is equivalent to the level of productivity of the irreplaceable resources of the country

5. Conclusion 

MaCurdy, T. (2015). How effective is the minimum wage at supporting the poor?. Journal of Political Economy, 123(2), 497-545. 

- The journal incorporates the fact that the rise in the minimal wage will definitely help the workers to obtain a greater level of purchasing power of the same goods and services that they use to consume earlier. Initially they will feel happy due to the fact that the same goods and services that seems to be expensive to them after rise of the minimum wage became affordable to them. Due to increase in the minimum wages the economy gets a positive impact in terms of the fact that not only the purchasing power but also the consumer expenditure will be raised. This will increase the capital spending within the economy and hence the money circulation will increase within the economy. The quantity of circular flow of income from households to factories and vice-versa will get multiplied by the amount the minimum wage is being raised. As in Ontario the minimum wage is double hence the volume of payment and the goods and services demanded will get doubled too. Along with that due to rise in purchasing power as it took place in Amazon 6 months before the employees were very happy and the employer and employee relationship was enhanced. This is thus an effective strategy incorporated by the private firms to enhance their minimum wage level to their employees which make the employees to feel that the organizations values them by raising their standard of living within the existing market. Based on the survey, the point of view of the employees revealed that due to rise of the purchasing power and at the meantime the rise of the prices of the goods and services that were demanded by the employees did not increased hence the employees can consume for of the product and services by per unit capital expenditure. Due to increase in consumption and a part of saving the national income also get increased and the economy gets boosted. The journal article clearly reflected the fact that the increase in the minimal wage provides a positive effect within the economy by satisfying the common people and ensuring that their ability to purchase and saving as well as investment increases. However, it was incorporated in the journal that most of the people within the middle income class are not able to spend much so whatever they earns most of them are being consumed. Due to this reason it is not possible from their end to accomplish investment for future earnings. But as the minimal wage have risen hence this will provide the ability to the labourers to think beyond and upgrade them into the first take off stage of the upper class zone where they will be able to cross the threshold line of poverty. 

Feasibility of Minimum Wage to Alleviate Poverty

Machell, K. A., Disabato, D. J., & Kashdan, T. B. (2016). Buffering the negative impact of poverty on youth: The power of purpose in life. Social Indicators Research, 126(2), 845-861. 

- The journal article is written by Machell, Disabato & Kashdan, (2016) according to which rise of minimum wage renders the fundamental plinth of the creation of another form of worker’s misperception model.  The basic understanding lies with the fact that the workers are not always aware about the existing price level within the economy and they just gets impressed with the nominal wage that they gets or seem to get. However, the real wage differs based on the price level changes. As per the sticky wage model, it is been assumed that wages due not get changed based on the changes in the price level which get changes due to different impacts of the market forces and its interaction with the economy. So the workers’ demands a rise in their wages as they feel that it is becoming tough for them to sustain within the economy where the price of goods and services have increased. The organizations utilizes this opportunity to satisfy the employee grievances and increases their wages in disguise of the fact that the workers sees that their nominal wage may get doubled but their real wage remains the same. The worker’s misperception model comes under consideration in this place as it is been seen that the organizations are much aware with the changes in the price level which is different from the price level as expected by the workers. Formulating the problem it was been highlighted in the journal that Real Wage (W^r) equals nominal wage (W) by price level. This means W^r = {(W/P)*(P/P^e)}. Based on this equation the supply of labor varies. Since the labour are not aware of the fact, whether (P/P^e) has decreased or increased, the organizations utilizes the asymmetry of information and raises the wage temporarily to satisfy the workers. But in reality the organizations disguised the workers in the name of real wage but actually provide the nominal wage which after a few periods autocorrect itself into the same real wage level that they were getting initially. Along with that what happens is that due to rise in the consumer’s purchasing power the demand for goods and services gets raised resulting in a demand pull inflation within the economy.  

Dabla-Norris, M. E., Kochhar, M. K., Suphaphiphat, M. N., Ricka, M. F., & Tsounta, E. (2015). Causes and consequences of income inequality: A global perspective. International Monetary Fund.

Impact of Minimal Wage on Workers and the Economy

- The journal article incorporated the fact that the government imposes the notion of doubling the minimum wage as it is found in Ontario taken under view the growth of the economy which will be supported by raising the co0nsumer spending and lowering the interest rates provided by the banks. When it will be seen that the rate of interest in the banks is low yet the minimum wages are high then people tends to spend on assets as they realize that savings in the banks will not provide tem higher future earnings as the interest is low though investing the extra income into assets will definitely provide them future earnings at times of crisis. This raises the consumer spending and the liquidity which in turn rises the national income as well as the total flow of capital that is being transacted within the economy. Too much money in circulation devalues the currencies which in turn affects the exchange rate the state of inflation occurs. Inflation leads to another set of rise in the price of goods and services after the rise in the goods and services that took place due to the rise in the purchasing power of the workers. All of this activities together siphons off the extra rise in the minimal wage into the percentage rise in inflation. Thus the journal emphasized on the issue that the rise in the minimal wage can provide a temporary boost to the economy by raising the national income through the rise in consumer spending as well as also by satisfying their needs and covering up employee grievances though in the long run it actually gives birth to certain catastrophes in the economy which is excessive inflation and devaluation of the currency.  

Azam, M., Haseeb, M., & Samsudin, S. (2016). The impact of foreign remittances on poverty alleviation: Global evidence. Economics & Sociology, 9(1), 264.

This journal article was written by  where it was been reflected that due to rise in the minimal wage there is rise in the level of employment as well as the rate of labor substitution. To emphasize on this issue it can be reflected that due to increase in the minimum wages of workers the organizations look for recruiting specialist in the fields for which recruitment is been conducted. Since the wages are high so it attracts the supply of labor force. This makes the organization to acquire only the experts and sack the average one. Thus unemployment increases all of a sudden which are not always backed by providence of alternative employment opportunities. People migrates from one region to another with the objective of obtaining higher wages, However, later they realize that they have been disguised in the name of rise in the nominal wage but not in the real wage due to the workers inability to anticipate the actual price level. Moreover, the rise in the wage actually attracted the workers at the cost of their expectation of the rise in wage which is actually the rise in the nominal wage but not in the real minimum wage. Hence, the expectation of the workers led them to a wrong decision making for which not only rise in the nominal minimum wage have taken place but also the rate of labor substitution as well as the skilled labor force are employed while the unskilled labor force faces sudden unemployment. It is also been seen that the unskilled labor forces are replaced by different kiosk which are technologically advanced automated machines. The rise in the wage raises unemployment and injected technology dependent and low labor intensive economy. While the cost of keeping a labor force of 100 people may have been $1 million in that place keeping 10 experts accompanied by automated machines will be $ 0.8 million. This helps the organizations to save their money and use them in the form of further financial investment or keep them as profit earnings. Thus poverty is temporarily seem to get reduced while the truth is that in the long run the workers traverses a path or loop of vicious circle of poverty.  

Hirsch, B. T., Kaufman, B. E., & Zelenska, T. (2015). Minimum wage channels of adjustment. Industrial Relations: A Journal of Economy and Society, 54(2), 199-239. https://onlinelibrary.wiley.com/doi/abs/10.1111/irel.12091

Smith, L. (2015). Reforming the minimum wage: Toward a psychological perspective. American Psychologist, 70(6), 557. https://psycnet.apa.org/record/2015-39598-006

Yang, J., & Qiu, M. (2016). The impact of education on income inequality and intergenerational mobility. China Economic Review, 37, 110-125. https://www.sciencedirect.com/science/article/pii/S1043951X15001637