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First The Minimum Wage, Then Competition – Alex Lam
March 16, 2015 | Leave a Comment
Both the argument for and against a higher minimum wage is plausible and understandable. Those for the increase suggest that it will help alleviate poverty, while those who are against it suggest that it will do little since the supply of workers will increase will the supply of jobs will decrease. Despite the naysayers, both the local and federal governments are acting and pushing for an increased minimum wage law. I agree that raising the minimum wage is necessary, but at the same time, I agree with those who oppose it and suggest it will not make much of a difference. My stance is that raising the minimum wage is a positive first step, but it is the first step out of many.
Christina D. Romer from the New York Times brings up an interesting point (using the principles of economics). She suggests that the real way to increase wages if to increase competition. After all, the best people will likely work for nine dollars an hour, rather than eight dollars an hour. With that being said, more regulation is needed to limit the strength of large organizations like the Wal-Marts and McDonalds of the world. By limiting their power in the areas, they will be forced to pay higher wages due to the competitive landscape. Yes, this does bring into question about the sustainability of low prices. However, I argue that this competitive environment will spur innovation on how to most efficiently and effectively use resources and therefore cut operating and other costs in order to pass on the savings to the consumers. This is not a short-term process by any means, but the longer-term results will be worth it. The current state allows these large companies to be wasteful and at the same time pay workers poorly while the executives take home the bulk of the earnings.
Rather than looking at minimum wage as a law for redistribution of wealth, it needs to be seen as a tool to increase the efficiency of society. Currently, the jobs that are in question are undesirable. It takes little skill, and almost no education to work these positions. Therefore service suffers, and companies have to hire additional staff in order to increase the efficiency of the business. While I do not suggest that raising minimum wage will make working at McDonalds appealing, I do believe that it will motivate workers to work a little harder on their jobs so that less people are needed and we can use the others for other needed jobs.
In a broader view, giving more people spending money to use, it can spur innovation in society as a whole. People spend money on things they want, and the innovations they believe to have a place in society. For example, society decided that the smartphone should function much like the original iPhone. With the money they provide to the industry, we can inspire more innovations among the young inventors and innovators. In a more idealistic view, it gives people a chance to invest in the inventions they believe should be brought to the world.
Of course, we cannot talk about future steps without talking about the importance of education. In order to make people more attractive to businesses, we have to ensure that they are educated. Providing policies that make education affordable, yet comprehensive will make the labor force more skilled and advanced, and businesses will be forced to compete.
The minimum wage laws do have a small impact in alleviating income inequality, but it is the right first step. Action needs to be taken to spur competition, so that businesses have to compete for the best. At the same time, we need to ensure that these workers are educated enough for companies to want to compete for. Poverty may never disappear, but it can certainly decrease. May steps are needed, but these three will certainly show some sustainable improvement in the long-term.
