The debate over raising the minimum wage is a contentious one, with proponents arguing that it will lift workers out of poverty and stimulate economic growth, while opponents argue that it will lead to job loss and higher prices for goods and services. As we look ahead to 2023, it is worth considering how an increase in the minimum wage might affect the labor market.
Walmart, an United States multinational retail corporation, has announced it will be raising the minimum wage for store employees to $14 dollars an hour. The jump in salary represents a 17% jump and an average salary of $17.50 an hour. This is a trend spreading across the big retail giants, whose influences crosses markets. Amazon and Target have a minimum rate of $15 dollars an hour, and Costco bumped its minimum rate to $17 dollars an hour in October of 2021.
Raising the minimum wage can have a number of positive effects on the economy. One of the main benefits is that it increases the purchasing power of low-wage workers, leading to increased consumer spending. This can, in turn, drives economic growth as businesses see an increase in demand for their goods and services. Additionally, raising the minimum wage can also boost the incomes of families living in poverty, which can reduce income inequality and allow for more disposable income.
In the near future, Walmart is going to have a number of layoffs due to the decreased demand for goods as the world fights inflation. With the recent increase in wages, Walmart hopes to recognize and boost the morale of the workers who remain with the company. By retaining a strong staff, encouraging associates to sell more goods with incentives, and creating a customer base with the Walmart+ program, Walmart hopes to see sales continue to grow.
Opponents of raising the minimum wage argue that it can increase the cost of goods and services produced by domestic companies, making them less competitive in the global market. This can lead to a decrease in exports and an increase in imports, as foreign companies may be able to produce goods and services more cheaply - all of this could end in an increase in offshoring among many different companies.
The increased labor costs can also make companies look for cheaper labor in other countries, which can lead to offshoring or outsourcing jobs. Some of the top countries that are offshored by US businesses are the Philippines, India, China, and Brazil. On one hand, Offshoring does have negative effects on the home countries of the companies, leading to higher unemployment in the home country, loss of intellectual capital, loss of manufacturing capacity, and reliance on foreign relations to keep peace between the two countries. Additionally, offshoring could lead to higher prices for goods and services, as businesses would pass on the cost of higher wages to consumers, thus fueling inflation. On the opposite hand, the country that is being targeted by outsourcing now has a larger job market, which can mean more employee autonomy, and a increase to standards of living if the country has proper labor laws.
Raising the minimum wage would likely have a significant impact on the labor market in 2023. It would boost the earnings and purchasing power of low-wage workers, which could stimulate economic growth. However, it could also lead to job loss and higher prices for goods and services. The key question is whether the benefits of raising the minimum wage would outweigh the costs.