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Minimum Wage in the United States

In the present conditions, when the wave of price hikes is increasingly reducing the standard of living of the population, there is no other way to save workers from poverty, except by raising salaries. That is why the domestic trade unions do not cease to advocate for an increase in the payment of labor of citizens. The necessity of transition to the policy of “developing growth” of wages in the framework of the conception of the state program for overcoming poverty of the able-bodied population is substantiated (Department of Labor, U. S. n.p.).

Raising the standard of living of the population, ultimately, is the main goal of social policy and the main criterion of its effectiveness in any civilized country (Handerson n.p.). Reducing poverty is one of the most important components of achieving this goal. The significant level of poverty in America, which is much higher than in most industrial countries of the world, is, on the one hand, a consequence of the incipient policies that began in the early 1990s, radical economic reforms and, on the other hand, shows that social policy measures are not effective enough. It is clear that economic stabilization and the transition to economic growth are indispensable conditions for reducing poverty in America. World experience shows that, during the period of adaptation to market relations, poverty declined more markedly in countries whose policies, as the main goal, meant economic growth. Such a policy created additional opportunities for participation in the labor process and increased investment in human capital, so the poor people not only enjoyed the results of economic growth but also contributed to it, contributing to the further development of the economy (Handerson n.p.).

Although economic growth is necessary to reduce poverty, it is not in itself a sufficient condition for poverty reduction. Economic growth promotes more active participation of the poor in the production process, however, it does not guarantee family prosperity. The impact of economic growth on poverty reduction depends on how the income and opportunities presented to poor citizens of the country by growth are distributed among the population (Department of Labor, U. S. n.p.).

Minimum wages have a decisive impact on the economy and the social sphere since it is in this form that the majority of the employed population – the employees – earns their income. Considering the influence of the wage on the poverty level of the working population, let us briefly dwell on such aspects of this problem as, first, wage differentiation, which is a factor of poverty, secondly, the impact of the informal economy on the scale of poverty and, thirdly, the creation mechanism of market regulation of wages (Handerson n.p.).

Summarizing the above, we note that the huge economic and social differentiation in wages, unjustified from the standpoint of the quantity and quality of labor, could not but affect the standard of living of the bulk of the population and the sustainability of poverty. In general, in the country in late 2009, the average monthly wage exceeded the minimum wage, which was at a very low level, only 3.3 times. Along with this, these differences are very negative social consequences, and intensify social tension, as they contradict the principle of social justice and do not reflect the real labor contribution. This contradicts, among other things, the principles of a market economy, testifying to the underdevelopment of the domestic labor market and the absence of free competition in it.

The overcoming of the existing unjustified economic and social differentiation in minimum wages should not be achieved by lowering the levels of remuneration in relatively high-paid sectors of the economy, in which minimum wages still lag far behind the values determined by labor productivity. Economically justified and socially acceptable relationships can be achieved by pulling the advanced branches relatively lagging behind (Department of Labor, U. S. n.p.).

Considering the second aspect of the impact of wages on poverty in our country, we cannot fail to note the rapid growth of the informal sector of the economy, which today accounts for 10-50% of officially recorded economic activity. It is clear that the functioning of the informal sector of the economy determines the corresponding informal employment and shadow forms of labor payment (Handerson n.p.).

The shadow economy in our country played a positive role in a certain sense, mitigating the negative consequences of market reforms. Otherwise, it is difficult to explain the absence of public disturbances at such a significant officially registered level of poverty and social differentiation of the population by income. At the same time, many activities in the informal sector are characterized by low labor productivity, low wages, and poor working conditions. These circumstances, as well as the existence of a close relationship between the formal and informal sectors and the trend towards globalization of the informal sector, necessitate greater social security and minimum employment standards in this sector of the economy.

There is also the opinion that raising the minimum wage on the basis of a state decision may serve as a stimulus for the growth of unemployment in the country, but such a consequence will be temporary. Indeed, the expert explains, enterprises whose costs will increase due to the increase in the minimum wage will be forced to reduce the number of employees by making a decision in favor of increasing the efficiency of the part of the staff that will remain working. As a result, the growth of salaries will lead to an increase in the efficiency of the functioning of the mechanism of the domestic labor market, “turn wages into a real price that provides a balance in the labor market.” But even in such conditions, after the increase in wages there will not be a lot of pressure because of unemployment, since, in his opinion, the biggest problem of the labor market in the USA is not unemployment, but its functionality. Indeed, as noted at the beginning, there are thousands of vacancies in our country and, as many business owners said, especially in rural areas, employers are ready for mass employment of workers, but, alas, they do not have anyone to hire (Handerson n.p.).

At the same time, the expert believes that the expansion of unemployment due to the increase in salaries will be only temporary, since the economic growth, to which the increase in actual demand will lead, will serve as an incentive for creating new, much more productive jobs, which will absorb the surplus labor force in the job market. So, summing up, it should be noted that the arguments convince that the increase in wages for which trade unions of USA stand up, speaking in medical language, is an effective tool for combating poverty and has no side effects. It remains only to the government to use this recipe (Lopresti 1171–90).

The minimum consumer budgets determine the boundaries of the family income, for which reproduction of socially acceptable living conditions is not ensured. On the basis of the minimum consumer budget, the poverty threshold is set and the minimum wages are calculated. The minimum wage indicates the cost of the minimum in composition and quantity of the set of consumed goods needed to preserve human health and ensure its vital activity. The level of the minimum wage depends on many socioeconomic factors and is sufficiently mobile. Distinguish the physiological (vital) and social minimum (Marchand 491). The first is designed to meet only the main physiological needs of a person and pay for basic services. The second includes, in addition to the physiological minimum, the cost of a minimum set of spiritual and social benefits. In developed countries, the social minimum wage is calculated.

In America, the poverty threshold is defined from 2006 on the social minimum wages, the level of which is different in different regions of the country. The minimum wages establish the absolute poverty line. The concept of relative poverty is also highlighted. The boundary of relative poverty can be defined in different ways (Marchand 491). In the EU countries, families fall into this line, spending less than half the average total household expenditure across the country (Lopresti 1171–90). In social studies, the depth and severity of poverty (based on the calculation of the deviations of family incomes from the subsistence level) that determine the poverty profile, that is, the poverty profile, are used to characterize poverty. In developed countries, the majority of the poor are either elderly, disabled, sick, or unemployed men or their families. In America, poverty is widespread among a large part of the working population (in particular, in the budget sphere), because poverty has nothing to do with unemployment; in the poor, the proportion of people with higher and secondary vocational education is significant, which is not typical for developed countries. The poverty level is higher among the rural population than in the urban one; the spread of poverty is not the same in different territorial and natural climatic regions, between different ethnic groups of the population. The most likely not to fall into the category of poor are childless families, which pushes young people to the decision not to have children (Lopresti 1171–90).

Poverty is not only a personal problem for a low-income person but also a nationwide problem. The way out for a certain border in lowering the standard of living of the population threatens the economic security of the country. Therefore, a real assessment of the current situation and an active policy in the field of income redistribution are factors of socio-economic stability and progress.

Works Cited

David, Handerson. “American College of Healthcare Executives Code of Ethics to Help with Identifying an Ethical Issue.”, 2017,

Department of Labor, U. S. “Minimum Wage Laws in the States – Wage and Hour Division (WHD) – U.S. Department of Labor.” Wage and Hour Division, 2017,

Lopresti, John W., and Kevin J. Mumford. “Who Benefits from a Minimum Wage Increase?” Industrial and Labor Relations Review, vol. 69, no. 5, 2016, pp. 1171–90, doi:10.1177/0019793916653595.

Marchand, Joseph. “Thinking about Minimum Wage Increases in Alberta: Theoretically, Empirically, and Regionally.” CD Howe Institute, no. 491, 2016,



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