What are the positions on a minimum wage?

Encyclopedia of Opinion

Question: What are the positions on a minimum wage?
Position‹2 of 5›: The minimum wage is good for businesses
Argument‹2 of 2: Minimum wages reduce employee turnover

Employers save money on training due to higher employee retention.

The argument

Professors of economics, Dube, Lester, and Reich’s 2012 study found substantial income increases and employee turnover falls after minimum wage rises.. Proponents argue that paying minimum wage reduces employee turnover because workers are able to earn a decent living and are satisfied with their income. With a minimum wage, employees are provided with a stable monthly income around which they can plan their living expenses. Low turnover rates are especially evident when the economy stagnates or is struggling because the security provided by minimum wage regulations creates a degree of stability to the employee, and incentivises them to remain at the job. High turnover rates are most commonly attributed to low wages and lack of benefits. Without a minimum wage, employers can take advantage of the competitive labour market to find the cheapest labour and make it easy for employers to exploit employees under the guide of market competition. Minimum wages prevent this kind of employee exploitation and creates a healthier working environment. The minimum wage reduces work exploitation, creating greater satisfaction, and thus reduces employee turnover rates. The reduced turnover rates associated with minimum wages also makes business sense, as employers save money which would otherwise be spent on finding, hiring, and training new employees. As the saying goes, time is money, and high turnover rates waste a lot of time and money for both the employer and employee. Research by the Center for American Progress finds that business will spend approximately one-fifth of an employee's salary to replace a worker, and may lose more money due to slower productivity of new workers in training. Paying a minimum wage therefore saves both employer and employee money by lowering turnover rates.

Premises

[P1]Paying a minimum wage gives workers a stable, liveable income and reduces their incentive to leave, lowering employee turnover. [P2] Lower turnover saves employers the substantial costs of finding, hiring and training replacement workers — roughly a fifth of a worker's salary per replacement. [P3] These savings and the more stable workforce benefit the business itself. [C] Therefore, the minimum wage is good for businesses.

Counter-arguments

Employees earning minimum wage are not incentivised to stay in the job unless there is a clear path to wage increase.

Rejecting the premises

[Rejecting P1] The mechanism may run the other way. A wage floor compresses differentials, so a worker paid the minimum can earn the same at every competing employer and has less reason, not more, to stay with this one — which is why a path to higher pay, rather than the floor itself, is what retains staff. [Rejecting P2] Replacement costs are only one side of the ledger. A higher floor raises the wage bill for every incumbent worker, not only for those who would otherwise have left, and the premise never sets the saving against that cost. [Rejecting P3] Studies of firms around a wage change do not establish that businesses in general benefit, and the same literature is contested on whether some employers respond by cutting hours, trimming headcount or slowing hiring instead.

Framing

The minimum wage reduces employee turnover only where the wage rate reflects the real cost of the living in the area and thus ensures that a minimum wage job will cover basic expenses.