Introduction
The question of minimum income elicits controversies, especially concerning whether it should be made compulsory or not. Mandatory minimum income means that the government would pay a set amount of money to all residents in a given country. On the one hand, the proponents of this proposal highlight the many benefits associated with having people get minimum income, such as reducing poverty and stimulating economic growth, among other related aspects. On the other hand, critics of mandatory minimum income oppose it by citing the underlying adverse effects that could arise from the implementation of such a proposal, including increased unemployment and layoffs as companies struggle to remain afloat in a competitive environment burdened with high tax. This paper argues that minimum income should be made mandatory because it reduces poverty, stimulates economic growth, allows the government to spend money on deserving initiatives, creates more job opportunities, and allows companies to grow.
Pros and Cons of Mandatory Minimum Income
Mandatory minimum income ensures that more money is put in the hands of people who need it the most. The current labor market dynamics are characterized by wage inequalities with a small number of people earning the highest salaries, while the majority are getting minimum pay for survival. Concentrating wealth on a small group of individuals adds to the problem of global poverty. The lack of mandatory minimum income has created a scenario of a “working but poor” class of individuals in the US. For instance, in 2017, 13 percent of the homeless were working either part-time or full-time (Wagner, 2018). This argument implies that while such people are employed, they cannot meet their basic needs. Therefore, creating a mandatory minimum income and setting it at a reasonable level would ensure that all people are in a position to cater to their basic needs, which means that they will not be classified as poor. Additionally, mandatory minimum income reduces income inequality in society whereby wealth and resources are distributed fairly to all people in a society.
However, critics of this proposal would argue that contrary to the above argument, mandatory minimum income would contribute significantly to poverty. The logic behind this stand is that basic income takes money from the poor who need it the most and gives it to the middle class and the rich (Reed & Lansley, 2016). Under a mandatory minimum income policy, every person would be entitled to receive a certain amount of money from the government. Therefore, it implies that the available money will be shared among many people, meaning that wage inequality and poverty increase. However, this loophole could be addressed through policy because it is a genuine concern about minimum income. Policymakers could create laws that clearly stipulate who should receive help from the government through mandatory minimum income initiatives. As such, the rich would not be entitled to such monies from the government, which ultimately allows the focus to be directed toward the poor. In the end, the problem of poverty would be addressed satisfactorily, and even though it might not be eliminated entirely, it would be solved to acceptable levels.
Additionally, mandatory minimum income would spur economic growth due to increased expenditure by people with more disposable income. In an open market, growth is fueled by expenditure, which is closely associated with the level of disposable income among the majority of people. Therefore, giving citizens a reasonable minimum income as stipulated by law ensures that they have enough money to spend on various aspects of life. Consequently, different economic sectors will experience increased demand for their goods and services, which underscores economic development (Kearney & Mogstad, 2019). In return, as companies grow, they will need more workers, which creates opportunities in the labor market. Ultimately, with the companies growing, they will pay more taxes, and the government will have enough money to spend on areas that matter to societies. Ultimately, more people will get into employment and exit the poverty gap, which then leaves the government with even more resources to take care of the disadvantaged through various social safety programs. Therefore, it suffices to argue that mandatory minimum income creates a win-win situation for all involved parties.
On the contrary, the opponents of this wage proposal would counter this argument by noting that with companies facing increasing tax burdens, they will downsize, fire employees, and struggle to remain in the market. Additionally, faced with such challenges, companies would opt for outsourcing or moving operations abroad to countries with friendly tax regimes. However, this argument does not hold because once people get more money, they spend more, which, in return, stimulates economic activity and growth. Those benefitting from the mandatory minimum income are not looking to stash away all their monies in savings accounts. On the contrary, they are seeking to lead a decent life where they can afford basic needs, and if they have extra resources left, they spend them on various activities that bring joy, happiness, and fulfillment to their lives. Consequently, instead of closing down, companies would expand their operations to cater to the growing demand for goods and services. As such, putting more money in the pockets of those who need it the most would stimulate economic growth through increased household expenditure.
Similarly, mandatory minimum income means that the government would reduce its welfare spending. The government’s first role is to protect its citizens, and ensuring that people are given a minimum annual income is one of the ways to achieve this objective. Poverty is the leading cause of increased expenditure by the government on social safety programs. When the majority of people in society are poor, the government has to spend more money on social welfare programs to take care of such individuals (Hoynes & Rothstein, 2019). However, as shown in this paper, mandatory minimum income stimulates economic growth, which then creates employment opportunities, thus taking people off social welfare programs. Additionally, with guaranteed minimum income, it means the majority of people currently drawing from the social programs would become ineligible because they already have enough money to take care of their basic needs. Consequently, the government’s expenditure on such programs is reduced significantly, and the saved monies go to other deserving individuals in society, such as the disabled and the extremely less fortunate. In the end, the majority of people benefit, which advances the creation of better societies.
However, critics would fault this stand by questioning how the government would fund such a program without increasing taxation to unreasonable levels. This argument sounds plausible, but a closer look reveals that it lacks objectivity. While the government will be faced with the burden of higher wages, on the one hand, it will collect more revenue, on the other hand, in terms of taxes when the economy is growing and companies expanding their operations. Ultimately, the money coming in as revenue will be more as compared to the expenditure associated with the increase annual wage bill. Additionally, the government could create incentives for businesses to invest in the country, thus increasing its tax base. Therefore, the government will have enough money to meet its obligations and invest in social safety programs to ensure that the less fortunate are adequately taken care of, thus promoting equitable distribution of resources.
Conclusion
This paper has shown the numerous benefits associated with mandatory minimum income in the labor market. This proposal ensures that the people who need money the most have it to lead decent lives. The US is currently living in a paradox of “working poor” whereby employed individuals are so poor that they cannot afford homes. Mandatory minimum income would address this problem by making sure that workers can meet their basic needs by getting additional help from the government. In addition, employers, due to stimulated economic growth, would have enough resources to pay their employees decently, thus addressing the problem of poverty. Companies and the government alike would also benefit immensely from such laws. First, organizations would experience growth, with consumers having increased purchasing power. Consequently, the government would collect more revenues from an expanding business environment and direct such funds to catering for social safety programs for the benefit of the less fortunate. The points raised against mandatory minimum income are weak, and thus the merits of such a policy outweigh the demerits.
References
Hoynes, H., & Rothstein, J. (2019). Universal basic income in the US and advanced countries. Web.
Kearney, M., & Mogstad, M. (2019). Universal basic income (UBI) as a policy response to current challenges. Web.
Reed, H., & Lansley, S. (2016). Universal basic income: An idea whose time has come? Compass.
Wagner, D. (2018). Working while homeless: A tough job for thousands of Californians. Web.