Low Wages Paradox by Large Employers (Essay Sample)

Low Wages Paradox by Large Employers
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Abstract
Low wages paid by major corporations have positive and adverse effects. Adverse effects outweigh positive based on the policy of lower pay by major corporations. Diminished value of money has negatively affected workers. Low paid workers are more prone to economic downturns. The private sector pays lower median wages than lower cadre state jobs. Low salaries have resulted in economic inequality and increased costs to the taxpayers. Executives’ annual earnings have surpassed reasonably accepted wages unlike wages of lowest paid workers. Fair remuneration activists previously accused the largest employers of colluding in setting wages for low-paid workers, especially in the services industry. Naturally, the low-cost regime has allowed companies to amass vast cash reserves for future use. Large corporations’ cash holdings growth has already surpassed profit growth by the same major employers. The essay examines the main effects of lower pay by major corporations against the workers, executives and the companies’ cash holding position.
Low Wages Paradox by Large Employers
Liberalization of most economies globally has allowed forces of supply and demand determine wage structures in most economies. Currently, Low-wage workers are mainly employed in major companies. Low wages necessitated implementation of minimum wages in most economies. Large private businesses employing a high number of semi-skilled workers have usually paid minimum wages while earning huge profits annually. Some of the large companies paying low wages are Next (United Kingdom), Wal-Mart and Yum! Brands (both from the USA). The essay seeks to evaluate the positive and adverse effects of low wages paid by major corporations.
Adverse Effects
Adverse effects have negatively affected the workers, cost to the state and increased economic inequalities between low paid workers and high ranking executives. The essay clearly evaluates the negative effects.
Diminishing Value of Money
Global economic changes have reduced the purchasing power of money for different economies worldwide. Reduction of the purchasing power of money necessitated review on minimum wages. Therefore, the Federal government established the Fair Labor Standards Act assented in 1938, to increase minimum wages to meet growing living costs in the USA (Prakash & Skemp, 2015). However, the value of cash in terms of purchasing power is 30% inferior now to 1968. Changes in inflation have surpassed growth in minimum wages, especially in the USA. George Bush administration implemented changes on the minimum to the current level. Reports indicate workers in low-paying occupations from major corporations are worst affected by economic downturns such as the 2008 crisis. Therefore, major companies negatively affect workers’ and ought to remunerate employees fairly and in sync to money’s purchasing power.
Economic Inequality
Major companies have extended variations in wages between low paying workers and executives of major corporations. Precisely, 92% of the 50 largest employers of low workers were profitable the previous year. Stockholders have pocketed $174.8 billion in returns from the 50 companies while executives earned more than $9.4 million last year from the same firms. However, the companies have consistently paid the federal minimum wage ($7.25 per hour) to the lowest paid workers (Mishel, 2013). The mismatch between fair remuneration has prompted calls for the review of minimum wages to force the employers to increase wages for the lowest-paid workers. However, previous attempts by the Obama administration to review the minimum wages have stagnated amid resistance by large employers in the USA. Consequently, the evident mismatch between earnings among low paid workers and executives has increased economic inequalities in the nation.
Massive State Expenditure
Developed countries have implemented transfer payments to low-earning workers through initiatives such as tax credits and house benefits. However, the real beneficiaries of the efforts are large businesses employing low-paid workers and landlords in major suburbs. The United Kingdom has subsidized low paying jobs in excess of £12 billion from the taxpayers’ coffers (Jordan, 2012). Precisely, employers such as Asda, Next, Sainsbury, and Tesco are some of the beneficiaries of the state’s welfare programs. The programs have led to the lower adoption of the necessary technology on the availability of low-cost labour and lower remission of corporation tax than subsidies received by employees of some of the firms. The state’s plan of massive cuts on welfare programs and lobbying of wage increments will reduce by a massive £6.7 billion of the massive £12 billion on subsidies. Consequently, the policies will reduce the cost to the taxpayers.
Positive Effects
The post-crisis period ushered in prudent and low-cost regime by most major corporations. The largest employers are benefitting from the low-cost system through higher profitability, translating to large cash reserves. The essay clearly explains the positive effect of low wages on the main corporations.
Large Cash Reserves
Economists believe the accumulation of money earned by large corporations is critical during economic downturns (Al-Najjar, 2013). Prior to the crisis of 2008, economists had pointed out frailties amongst private businesses in case of a major crisis. Precisely, 73% of the 50 largest low pa...