Raising minimum wages actually promotes growth (Meroney, 1995) and will have a positive effect on the economy. The positive effect will come from promoting job growth. This statement was made by U.S. Labor Secretary Robert Reich. Reich recommended that the minimum wage of $4.25 and hour be pushed up to $5.15 an hour over a two-year period. Reich said, it has been shown that pushing the minimum wage up, would assist in welfare reform, and lower the number of persons on welfare, by making wages high enough to motivate people to go to work, rather than stay on welfare. And with more people in the job market, with more money to spend, increases would be shown in both gross national product sales, and an increase in taxes derived from sales taxes.
Although the anti-minimum wage faction states that raising the minimum wage would put more people out of work, a study in 1992 by Larry Hunter, the chief economist for the Joint Economic Committee, stated that after interviewing restaurant owners regarding the effects of raising minimum wages, it was found that no jobs were lost. The study was done in New Jersey, where the legislature had boosted minimum wage to the highest level in the United States (Meroney, 1995). What happens said Hunter, is that people don't go out and begin firing workers after a raise in minimum wages. "You just adjust."
A negative in adjustment sometimes comes in the form of lowering the number of total hours worked by employees while encouraging the workers to increase the amount of work out put in job performance. But overall, the study indicated that lower minimum wages actually encourages more mothers on welfare to stay on welfare. Where minimum wages were the lowest, there were the highest rates in persons on welfare.
Another argument for raising minimum wages comes from the view that higher wages increases purchasing power (Rothstein, 1993). Low wages results in the inability of the U.S. to absorb exports, and a need to sell goods at lower prices in the American market. Low-wage competition from the nations with low wages, then puts pressure on the U.S.' living standards as domestic manufacturers cut wages and benefits to compete. Wage growth in developing nations is therefore essential not only for their…