Minimum wage is a policy issued by governments in order to ensure workers are justly compensated for workers in an economy. Many out there would be shocked to believe this topic is even considered for debate; however, “justly” is a very subjective term. Who is to decide how “fair” a salary is? The minimum wage debate is one of the most polarizing in economics as there are pros and cons to setting these boundaries on the market. A market based economist would argue that wages should be determined by supply and demand, whereas a Keynesian economist would support the idea that the government should support trade unions and worker’s compensations. While both schools of thought offer distinct opinions on the subject, they are both valid in their economic reasoning. That being said, minimum wages are essential for the protection of workers and the stimulation of the economy. 

Many argue that the minimum wage creates market inefficiencies. Paradoxically, minimum wage can generate unemployment, especially for entry-level or low-skilled workers. A higher minimum wage is a higher cost of production for a producer, which forces them to cut costs. This therefore can be done by cutting hours or laying off workers, or perhaps act as an incentive to modernise and automate jobs. If firms, on the other hand, choose to keep their workers they will instead have tot pass the cost of the minimum wage onto the consumers through higher price levels. This is obviously burdensome to the consumers in the small scale, but in the long run can lead to inflation. Inflation can hence derail the economic security experience by those enjoying the benefits of a higher wage. Overall, minimum wage can have very negative effects on the larger economy if not carefully controlled. 

However, the humanitarian aspects of economics should not be overlooked: minimum wage benefits many households, and oftentimes has favourable repercussions for the economy as a whole. Minimum wage protects the lower and low-middle class. For many families, the aid of minimum wage can make the difference between having dinner or going to bed hungry. It enables them to afford basic necessities which should be accessible to everyone, for instance food, housing, and healthcare. Moreover, minimum wage has also proved to improve the morale of workers. If they feel they are properly compensated, they will generally be more loyal and productive. Furthermore, if more consumers have more disposable income, then spending would increase. This stimulates the overall demand levels in an economy and therefore drives economic growth. Many argue this is once again a concern for inflation, as increased demand puts upwards pressure on prices. However, it is important to consider the broader nature of this issue. While some inflation can occur, it is the natural course of economic growth. Low levels of inflation are, in fact, better for the economy as they show a long term expansionary trend. 

While concerns about it are crucial to recognise the human cost of inaction. Minimum wage not only has a major small-scale impact on individual households, but a net benefit on our society overall. Inflation is a core issue in economics, and one that is crucial to address, but minimum wage is the wrong way to combat it. The benefits of protecting workers, such as reduced poverty, higher productivity, and overall economic growth, greatly outweigh its negative counterparts and therefore it is essential that minimum wage is implemented in economies.