5 Reasons Why Countries Should Raise the Minimum Wage

5 Reasons why countries should raise the minimum wage

The current federal minimum wage in the U.S. is $7.25. With Los Angeles recently approving a minimum wage hike to $15, the debate over minimum wage has intensified across the country and around the world, with a number of governments considering similar measures.

We have compiled a list of arguments from the pro-minimum wage hike camp that explains why raising the minimum wage would be good for everyone.

minimumwage51. Raising the minimum wage will help the economy recover 

A crucial part of bringing back growth to the economy is raising people’s purchasing power. Simply put, the more money people are able to spend and put back into the economy, the more the economy grows.

According to the White House, raising the minimum wage would increase the disposable income of 28 million people, which in turn would boost the bottom line of businesses across the country.


2. Raising the minimum wage would reduce employment turnover

IKEA President Rob Olson recently announced that the company would be raising its minimum wage by $1.50. His reason for doing so was to reduce employee turnover so that it could cut costs for hiring and training while retaining experienced employees.

study published by the Journal of Organizational Behavior reinforces this idea, as it found that ‘high performer turnover significantly reduces firm’s profitability and suggests that firms need to pay special attention to high-performer turnover to maintain and increase firm performance’, reinforcing the need to retain skilled employees by raising wages.

minimumwage33. Raising the minimum wage doesn’t kill jobs

Opponents of the minimum wage hike cite job reductions as one of the main reasons why the hike is bad for the economy.

However, many studies such as the 2013 paper by the Center for Economic and Policy Research have found that ‘the minimum wage has little or no discernable effect on the employment prospects of low-wage workers’.

This combined with the company’s savings incurred from low turnover and customers with more disposable income creates a winning scenario.


4. Raising the minimum wage saves taxpayer money

Right now, a full-time minimum wage worker in the U.S. makes $14,500 a year, 28 million workers and their families are struggling to make ends meet. The resulting poverty means that millions of people are relying on government benefits, draining various social programs.

The minimum wage hike and the resulting increases in disposable income would mean that less people would need to rely on government assistance, which would ultimately save taxpayer money.

minimumwage15. Raising the minimum wage improves economic security 

With all the aforementioned in motion, raising the minimum wage would not only help the economy grow, but would also give everyone the feeling of economic security and confidence.

While this sounds like an arbitrary factor, confidence in the economy has a ripple effect that:

  • Stimulates spending
  • Lowers interest rates making it easier for people to access loans and credit
  • Boosts performance and returns in the financial market
  • Encourages investment

Finally, it also helps the economy avoid the dreaded deflationary trap that has brought the Japanese economy to its knees for the last 25 years and threatens much of Europe.