Advantages and Disadvantages of Increasing Minimum Wage

Minimum wage refers to the lowest possible amount an employer can pay an employee at an hourly rate. Since the first minimum wage was set in 1938, it has been increased 22 times. Raising the minimum wage is always a controversial topic and it tends to evoke strong emotions. An increase could have advantages for some and disadvantages for others and that is why the discussions often get heated. To get you educated on what the arguments are, we have listed some of the advantages and disadvantages of increasing minimum wage.


  1. Better quality of life. For impoverished workers, an increase in minimum wage will mean they can have a better quality of life and better conditions.
  2. It will level with inflation. The minimum wage has not kept up with inflation over the years and this means that many workers don’t earn enough to care for their families. An increase in minimum wage will bring it better in-line with inflation.
  3. Boost for the economy. If people have a bit of extra money they will spend it and boost the economy.
  4. Lower costs for social programs. The amount of money spent on social programs to help the poor will be reduced. This could potentially lead to lower taxes.


  1. Fewer entry-level positions. If the minimum wage is increased, employers may hire fewer people for entry level jobs that will start their career.
  2. Higher rates of high school drop-outs. An increase in minimum wage may increase high school drop-out rates as teenagers may be drawn to rather work and make money.
  3. Potential need for layoffs. An increase could force companies that have fixed compensation funds to fire employees to stick to the minimum wage.
  4. Increase in costs of goods and services. If employers need to pay more in wages, they may have to increase their prices to keep the business running successfully and to stay out of the red.

Both sides have valid points and it will remain a controversial debate until a solution that works for both sides, is found. Now, you also know what the big fuss is about.