Increasing the minimum wage increases worker productivity

  The minimum wage should be increased to $15 per hour by 2019 because doing so will increase worker productivity. Some recent studies have shown that higher minimum wages can contribute to higher worker productivity.Some studies have shown that raising the minimum wage allows workers to become more motivated. George Ajerlof, an economist came to the conclusion that employees show signs of higher effort levels in response to higher wages. This phenomenon is known as the efficiency wage theory.  According to economists Ronald G. Ehrenberg and Robert S. Smith, "higher pay can also elicit greater commitment and productivity from existing employees"( Ehrenberg and Smith). The efficiency wage theory also explains that higher pay increases the employees motivation towards the work that they are doing and when this happens the employees will work more efficiently and effectively. This will help worker productivity.

The effect of minimum wages as opposed to higher wages in individual firms on workers’ motivation has also been found to be positive. After conducting a standard natural experiment economist, Georgiadis found that the United Kingdom’s national minimum wage has operated as a kind of “efficiency wage' in the residential care homes sector because it increases motivation and leads to a reduction in the level of worker supervision required.  Further evidence from experiments conducted in the U.S. by  economists Mark F. Owens and John H. Kagel, also point to a positive relationship between minimum wages and workers' effort, which leads to the conclusion that " if well designed minimum wages can generate improved outcomes where employees have higher wages and employers have the same, or slightly higher, average labor cost" ( Owen and Kagel). Three economists Arindrajit Dube, T. William Lester, and Michael Reich found  that in a 10% increase in the minimum wage results in a reduction of 2.1% in turnover for restaurant workers and a 2.0% reduction in turnover for teenager ( Dube,Lester, Reich).  This shows  that increasing the minimum wage can be beneficial for people who also get tips,  such as people who work in restaurants. This is the reason that increasing the minimum wage will increase worker productivity.

Works Cited:

Dube, A.; Lester, T., W.; Reich, M.; 2012. Minimum Wage Shocks, Employment Flows and Labour Market Frictions, IRLE Working Paper No. 122-12

Ehrenberg R. G. and R. S. Smith, 2009. Modern Labor Economics: Theory and Public Policy, 10th Edition,Pearson

Owens and Kagel (2010), “Minimum wage restrictions and employee effort in incomplete labor markets: An experimental investigation”,Journal of Economic Behavior & Organization, 73, p.317-326