Minimum wages reduce the costs of social programs

The argument

This argument approaches the minimum wage as a question of public spending rather than of fairness, and it rests on the observation that low pay and welfare spending are connected. A large portion of low-income workers receive federal funding through social welfare programmes. They are not, for the most part, people outside the labour market: they are in work, and they need the support because the minimum wage is not enough to sustain them or their families. Public money is therefore filling a gap left by wages. Seen that way, welfare spending on working households is partly a function of what those households are paid. If the minimum wage were high enough to support low-wage earners financially, they would not need to rely on that government assistance, and the spending attached to them would fall away. The saving is not achieved by cutting anyone off or tightening eligibility; it happens because fewer people meet the conditions for support in the first place, their incomes having risen above the threshold at which they qualify. The fiscal consequence follows. If workers are paid a reasonable living wage there is a reduced need for social programmes to help low-income people, government spending on safety nets can be reduced, and the money can be redirected to other areas. Minimum wages that are effective and high enough to cover living costs reduce the number of people who need to rely on social welfare, saving money that can then be invested in other beneficial ways. The conclusion drawn is a fiscal one, and it is available to people who disagree about the moral case. Whatever one thinks about what employers owe their workers, wages too low to live on shift a cost from the employer to the taxpayer. Raising them shifts it back. On this view, the minimum wage reduces the cost of social programmes, and so reduces government spending.

Context

A large part of the government's budget is spent on social programs providing support for those who financially struggle.

Premises

Counter-arguments

Introducing or raising a minimum wage would also increase unemployment and inflation. This would raise government spending on safety nets as a larger share of the population entered unemployment and purchasing power declined.

Rejecting the premises

[Rejecting P2] Minimum wages increase unemployment and inflation, doing little to improve poverty rates.