How Does Minimum Wage Affect Businesses

Minimum wage was established in 1938 as part of the Fair Labor Standards Act in the United States. The main purpose of this program is to establish a minimum income, which a certain business can give salary to employees to work.

On the other hand, minimum wage also affects businesses.

Understanding Minimum Wage

Minimum wage was developed together with other labor laws throughout the modern history to become a standard in the world of American business, even though widespread, the laws of minimum wage have some issues in terms of providing fair income to business and worker. As you know, one of the known complaint among politicians and economists is the laws can create wages which is not healthy for small businesses to maintain most especially in unqualified positions that would need cheap laborers.

Another problem that comes from the basic wage system is there are state and federal rates. It means there is no specific agreement that matches the larger trends of the market. In some system, specifically those small businesses that refuse state minimum laws are suited with the downward market trends and these systems also provide protection of basic wage as the economy improves. On the contrary, high wage states also require paying demanding wage amount in recessions and can lead to lay-off as well as other financial strength issues.

Job Losses

One of the biggest disputes regarding the ones who are opposing to the periodic increase of the federal minimum is the result of job loss. This is according to Jared Bernstein a spokesperson that tackles the Workforce Empowerment and Government Programs. Meaning, the minimum wage can surely affect the small business due to the fact that when the federal or state government regulates the wage, business owners will be forced to increase the wage, which is sometimes it is beyond their budget.

Lower Demand for Unskilled Workers

A reasonable minimum wage makes it applicable for small business to provide jobs to unskilled and young workers. In addition, unskilled workers can have the chance to hone their skills as time passes by and they can get higher position in the future.

To balance some of these concerns, the minimum wage law also allows the employers to lawfully deduct tips and some additional wages from average wages. It means, the unskilled workers can still work despite of the condition of the economy. For example, if you are working in the field of agriculture, the wages that you can get is actually according to the entire productivity as well as the value of crops. This makes it for you to have a fair wage for fair value of the product. In case there’s a natural disaster or catastrophe that destroys the agricultural products, it is more or likely that you will not get a higher wage or no wage at all due to the situation.

1 Comment

  • vipul mhatre said on December 13, 2013
    We provide unskilled labour to required company. Can you get the contract plz. City panvel local area maharashtra india.


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