What Are the Advantages and Disadvantages of Minimum Wages?

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Minimum wage laws help protect the lower and middle classes against poverty, but they can act as a deterrent against creating new jobs for some potential employers. Business owners will hire employees only if they will generate more money than they cost.

Countries with a large middle class score better on various metrics than those with a large base of poor people, and minimum wage laws are designed to keep the middle class strong. In addition, minimum wages are often based on the cost of living, so effective laws ensure that people are able to afford the bare necessities.

Opponents of minimum wage laws claim that these laws prevent employers from hiring as many people as they could because the money some jobs would generate is lower than the pay they demand. Jobs for young people, they argue, will disappear if the minimum wage is too low.

Minimum wage laws also increase how much money low-income workers have, and low-income workers tend to spend their disposable income at a higher rate than those who make more. Proponents argue that this extra spending has a beneficial effect on the economy and can lead to stronger economic growth. In addition, higher minimum wages lead to more competition and fight against inflation.