High minimum wages

Prohibitive minimum wages

Nature

High minimum wages refer to legally mandated wage floors set significantly above the market equilibrium for low-skilled labor. As a problem, high minimum wages can lead to unintended economic consequences, such as increased unemployment among low-skilled or inexperienced workers, higher labor costs for businesses, and potential inflationary pressures. Critics argue that these wage levels may force small businesses to reduce hiring, cut hours, or automate jobs, disproportionately affecting vulnerable populations. Additionally, high minimum wages can contribute to regional disparities, as uniform wage laws may not reflect local economic conditions or cost of living differences, exacerbating economic challenges in certain areas.

Background

The issue of high minimum wages emerged as a global concern in the late 20th century, when rapid wage increases in developed and developing economies sparked debates over employment, competitiveness, and business sustainability. Notably, the introduction of substantial minimum wage hikes in countries such as France, South Africa, and the United States prompted international studies and policy reviews, highlighting complex economic and social impacts and intensifying scrutiny of wage-setting mechanisms worldwide.

Incidence

High minimum wages have become a significant issue in both developed and developing economies, with numerous countries and regions enacting substantial increases in statutory wage floors over the past decade. These policy changes have affected millions of workers and businesses, sparking debates about employment, business viability, and economic competitiveness. The scale of the issue is global, with high minimum wage laws impacting sectors such as retail, hospitality, and manufacturing, and prompting varied responses from employers, workers, and policymakers.
In 2023, South Korea raised its national minimum wage by 5 percent, reaching 9,620 won (approximately USD 7.50) per hour. This increase led to widespread concern among small business owners, particularly in the service and retail sectors, who reported difficulties in maintaining employment levels and profitability.

Claim

High minimum wages are a very important problem that cannot be ignored. They threaten small businesses, increase unemployment, and drive up prices for everyone. By forcing employers to pay more than they can afford, high minimum wages risk shutting down local shops and reducing job opportunities for low-skilled workers. This issue demands urgent attention before it causes lasting damage to our economy and the livelihoods of countless hardworking people.

Counter-claim

Concerns about high minimum wages are vastly overblown. In reality, they are not an important problem at all. Higher wages empower workers, reduce poverty, and stimulate the economy. The fearmongering about job losses is largely unsupported by evidence. Instead of fixating on this non-issue, we should focus on real challenges like healthcare, education, and climate change. High minimum wages are a step forward, not a crisis.