Increasing the minimum statutory wage has much far-reaching implications . Research indicate that this has a major impact on the business, employment and labor market. Studies done on its impact show that the increase very probably leads to reduction of employment more so for the young and unskilled who typically get engaged in lower income jobs. So if the increase in minimum wage is not beneficial to the general economy, is it helpful to the labor force it ought to benefit?
On a positive note or rather short term the increase will mean that the workers will have an increased disposable income therefore they will be in a position to meet their needs more comfortably than they did before the increase. On the other hand the increase is just minimal therefore it adds very little to the income of the workers in general. This method has been found to be an ineffective tool for poverty reduction due to such negative impacts which mainly affect the people it ought to benefit.
(Neumark, D and Wascher, W 1992) An increase in minimum wage forces the employers to respond in certain ways, studies indicate that when minimum wages increase the employers often tend to reduce the fringe benefits for the workers and at the same time reduce trainings for the employees. They embark on a cost cutting measures so as to fill the gap created by the funds which go towards the increment. Such a move will affect the worker as he or she will enjoy less benefits.
In a matter of fact they might continue taking home the same amount of money or even less due to reduction or withdrawal of benefits. The cost cutting measures may deny a worker a chance to progress in a career when on job training as a benefit is done away with. On the same note to manage the business spending the employer may even end up reducing the hours of work further reducing the wage. (Neumark, D and Wascher, W 1992)
An increase in the minimum statutory wage may be a good thing in the short term, but it has a negative impact to the worker since the employers will have to act in a certain way to ensure that they continue to enjoy the same profits margin as they did before. Reference Neumark, D and Wascher, W (1992) Employment effects of minimum and sub minimum wages: Panel Data on State Wage Laws, Industrial and Labor Relations Review, vol 46
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