Advantage & Disadvantages of Minimum Wage

In: Business and Management

Submitted By buzzbuzz
Words 2611
Pages 11
Introduction

Minimum wage refers to the lowest hourly, daily or monthly wage an employee is legally entitled to when working. Minimum wage is in effect in a range of different jurisdictions with differences in the views on the advantages and disadvantages being disputed by people. Supporters claim minimum wage increases the standard of living for workers whilst reducing poverty. Opposite views are that if it is high enough to be effective then it increases unemployment, particularly among workers who are inexperienced or handicap, thus harming the lesser skilled workers to benefit the better skilled workers
The effect on employment rates due to minimum wage rates is a highly contested policy within economics. The introduction of minimum wage into the market can lead to competitive employers cutting employment; this depends on the rate of the wage rises require to comply with the current minimum wage according to the “standard textbook model”. Other models have also been suggested in which a decline in the employment rate may not occur and in fact employment may increase.
During my research I found a wide range of literature on minimum wages, particularly on the effects of a minimum wage policy in place. Though a lot of informative research was concluding I also found the argument between weather the effects and positive of negative on employment, both sides of the disagreement present a large amount of information supporting the theories. Research before the 1990’s mostly seemed to be based on a series of estimations and teenage employment figures, though after the 1990’s the research was conducted different results have arose, on one hand claiming that there is a growing body of research that found no negative effects but only positive for minimum wage and others claiming finding of significant negative effects, thus the effects on employment rates due to…...

Similar Documents

Minimum Wage

...Minimum wage is defined as the lowest possible income that an employer can legally pay an employee. This ensures that all people are fairly paid and not defrauded by companies or businesses. Minimum wage is now a staple in 90 percent of countries in the world (Minimum). Even with these minimums, a person’s lifestyle is hard to maintain. Sustainability, in my opinion, is the ability to keep or maintain a certain amount of physical or mental property. In this light of sustainability, minimum wage is not a sustainable amount of money in which to survive with a basic quality of life. There are many supporters and objectors to the minimum wage debate. Supporters say that increasing minimum wage increases the workers earning power and wages. Objectors say that increasing minimum wage only leads to unemployment due to small companies’ inability to pay workers. Also the increased inflation rate of goods only hurts the economy, which leads to many jobs being lost, mainly the jobs held by minimum wage patrons. Although this is a heated debate there is one thing to which both sides agree; something needs to be implemented so that workers are not exploited by businesses. Economists are exploring the viability of minimum wage, the standard minimum wage payments, and if there is anything we can do to keep the world on an equal playing field. There are many thoughts and opinions on minimum wage. Minimum wage was put into practice to keep businesses from taking advantage of the “small......

Words: 1906 - Pages: 8

Minimum Wage

...Minimum wage In our country so many people live in poverty. Even if they are working hard and doing everything right. Except the government who has been spending so much money on foreign soil that we have none left to spend on ourselves. Minimum wage is not as high as it should be with all of these outrageous prices and spikes in gas and food. It should at least be bumped up to eight dollars an hour starting out or maybe more. In these times of need we need companies to start appreciating there help instead of working them to death with little to show for it. I understand that our country is in crises with the economy being so bad. I also understand that we should help other countries if we can because we may need help in the future and making allies is a big deal. And, on a cynical level, I suspect that the government may know more about this kind of stuff than we do. Nevertheless, the government’s solution to cut pay or lay off hardworking people is unfair to our country and to the everyday, hardworking people of our country. Knowing how it feels to be a hardworking American I support the raise in minimum wage. Having two children and a husband who is not working being a single working household, I know how hard it is trying to live on minimum wage. I probably have the least amount of bills a person can have but we still struggle every day. The government’s decision not to raise the minimum wage already is turning people against everything it stands......

Words: 454 - Pages: 2

Minimum Wage

...A bid to raise the country's minimum wage has failed. A Private Member's Bill from Labour MP David Clark was defeated 61 votes to 59 at its first reading in Parliament last night. This decision has some reasonable arguments. As we know sharp increase in minimum wage can be effect of increase unemployment in the country,cause an inflation and black market, though increase in minimum wage means increase level of economy in country. Obviously, the main reason that government did not increase minimum wage is a fear of increasing unemployment. It is an reasonable argument, because the demand of work places will increase Q3 (if the minimum wage rate will increase), but not all employers can pay more then equilibrium wage rate(Q2- the amount of employers which would pay new wage rate)and they will reduce the amount of employees, that will be the reason of unemployment. We can see this situation on the graph below. min wage W1 is the equilibrium wage rate in New Zealand, which is now less 13.75, because it is still unemployment, which is 6.9 %. Q3-Q2 - people who lost their jobs. Also sharp increase in minimum wage can cause inflation, because firm's revenue will be less if they will pay more to workers and they will increase their prices to stabilize their revenue. Another disadvantage is that increase in minimum wage can be reason of increasing black market labor, more people work in black market and firms can avoid to pay legal minimum. This will effect New Zealand economy......

Words: 506 - Pages: 3

Minimum Wage

...0822881 Minimum wage bill defeated in Parliament Introduction: The demand to raise New Zealand’s minimum wage has decline. We live in a society where government has to make balance between employers and employees. Workers want better paying job and at the same time employers want to control labour cost. Therefor government put the floor of minimum wage “a minimum wage is the lowest wage that each employee can legally get from an employer” (exclusive papers). This is the lowest amount that a worker can sell his/her labour and that is what we need for better economy right now especially not a price ceiling which is "a set below the market price, then a "shortage" is created; the quantity demanded will exceed the quantity supplied"(week 3w/s).However increasing the minimum wage dose have many consequences on society, people will have better standard of living and encouraging more people to work but at the same time it will affect the employers in increase on their production costs. Therefore the employers has to cut down the staff and it could be hard to find a job for unskilled workers, youth or adults could also face problems in finding the job, which may result as increase in unemployment. Body: Economist needs assumptions to simplify the reality and models to apply (lecture1).As we take simple demand and supply frame work if the price of a commodity goes up, the demand of it goes down (week3) it is the same in case of labour market if government increases......

Words: 1067 - Pages: 5

Minimum Wage

...Introduction This critical literature review will focus on the impact of the National Minimum Wage on employment. This is an area we have had to familiarise ourselves with more and more throughout the last ten years because of the controversial effect of its instalment in April 1999 and its ever increasing minimum wage amount which causes most concern. The application of a few statistics should help summarise the ever increasing minimum wage and the sheer scale of people affected by its introduction. The national minimum wage has increased by a staggering 59% in the last ten years; from £3.60 in April 1999 to £5.73 in October 2008. (HRM, 2008) According to George Sayers Bain (1999) as from April 1999, the year of its instalment , “some two million low paid workers will gain. To put that into a different context is one in twelve employees; one in three house workers; one in five part time workers. The obvious reason for its introduction was to reduce poverty pay levels while at the same time decreasing the wage differentials of the minimum wage to the median wage of all workers. This is known as ‘the bite’ and is commonly used to assess the effectiveness of the minimum wage. (LPC, Low Pay Commission, 2007) As stated above the intention of this review is to firstly establish the effect of the National minimum wage on employment; justifying it as a positive, negative or mutual effect. Secondly to help incarcerate the purpose even more the retail sector will be focused on...

Words: 2214 - Pages: 9

Minimum Wage

...A huge controversy in the economics world in 2012 has been a possible raise of the minimum wage from $7.25 to $9.00. Many supporters of this increase believe that a $9.00 minimum wage would enable many adults to make enough money to live off for a year. This wage increase would give low-income families a chance to make more money to support themselves and their families. Following this, supporters say these so called “low-income” families would spend more, thus resulting in an increased flow of money in the economy. However, what these supporters do not see is, many of these families will go to large department stores or super stores to make their purchases. With these large stores getting all the money many small businesses will be forced to close their doors. In addition to small businesses losing these customers, employers will be faced with another tough decision. In many small businesses employees are paid based on their skill, position, or time of employment. Many of these workers are paid the minimum wage because employers of a small business are unable to pay them any higher in order to keep their store or shop open. So what happens? Employees that currently being paid $7.25 will now be paid $9.00 and those higher level employees being paid $9.00 would be also given an approximant pay raise to $11.00 per hour. Now, how does this hurt small business owners? Here is a possible scenario. Max is the owner of a small sports shop in Waverly that has been open for ten......

Words: 866 - Pages: 4

Minimum Wage

...RAISE THE MINIMUM WAGE TO $14 AN HOUR USING THIS ONE WEIRD TRICK! February 26, 2014 Share on facebook Share on twitter Share on email Share on print More Sharing Services 1.1K Democrats believe they've hit on the perfect issue to distract from the horror of Obamacare in the 2014 elections: the minimum wage. Apparently, increasing the minimum wage was not important for American workers during the first five years of Obama's presidency -- least of all his first two years, when Democrats controlled Congress and could have passed anything. (And did!) No. The minimum wage did not become a pressing concern until an election year in which the public's hatred of Obamacare is expected to be the central issue. As The New York Times explained, Democrats see the minimum wage as an issue that "will place Republican candidates in a difficult position," and also as a tool "to enlarge the electorate in a nonpresidential election, when turnout among minorities and youths typically drops off." (Unlike Republicans, Democrats consider it important to win elections.) To most people, it seems as if the Democrats are giving workers something for nothing. But there are always tradeoffs. No serious economist denies that increasing the minimum wage will cost jobs. If it's not worth paying someone $10 an hour to do something, the job will be eliminated -- or it simply won't be created. The minimum wage is the perfect Democratic issue. It will screw the very people it claims to help, while......

Words: 1113 - Pages: 5

Minimum Wages

... higher the wages will be. On the other hand, the supply of labour market is highly competitive that every household is the supplier of labour (Wall, 1995). Free and pliable labour market is self-regulating; the price of wages alter automatically to bring the market to equilibrium (Abbott, 2013). The Bertrand competition assumes that even in a market of two supplier, both assumes the other supplier will remain prices unchanged (Dufwenberg, Gneezy, Goeree, Nagel, 2007). In order to gain maximum benefits from the market, one has the incentive to cut price which leads to a price war. Minimum wage has been introduced as a floor price to deviate from the equilibrium to prevent competition and to increases the total income of a worker. Hence, increases household income and decrease welfare and assistance cost for the government (Root, 2014). Besides that, the introduction of this legislation can increase human capital accumulation; a low demand for unskilled labour, induced by a minimum wage, may encourage workers to accumulate human capital (Cahuc, Michel, 1996). However, surveys have been taken and shown that the majority agreed minimum wage creates unemployment within young, unexperienced or unskilled labour (Summer, 1991). High unemployment rate among teenagers, might have keep teenagers in school and not to join the work force in an early age, but this will not help increase in the total of household income for families with dependents. When the minimum wage is set by......

Words: 736 - Pages: 3

Minimum Wage

...Raising the Minimum Wage Over the years the minimum wage has been a talked about topic. Many people would see it as a great idea because it would help families financially. In reality raising the minimum wage would be more of a struggle rather than a gift. The minimum wage has always been a struggle for people. Many people think that raising the minimum wage will solve all of our problems, when in reality it will not. It would only reduce the human motivation. Raising the minimum wage would also eliminate jobs making the economy struggle more. There would not be enough money circulating through the economy. Raising the minimum wage would reduce human motivation, eliminate jobs, raise taxes, and make the economy go into a hyperinflation. Raising minimum wage will reduce human motivation. In a perfect world where everyone comes from a good home, and lives in society, where people are raised to strive for better. In today’s society we do not have the perfect world. We have children being raised up to where they have to find a job at a young age just to help support their family. Children being raised up in a home like this creates a loss of ambition. Imagine, only being a child getting a job at such a young age. The only thing on your mind is being able to support the family with the money that is coming in. Imagine fighting to get the education back that was lost. Imagine not being able to go to school because there is no more time or money to help out yourself. Then......

Words: 1676 - Pages: 7

Minimum Wage

...Outline I. Introduction II. Minimum Wage Defined a. Past Minimum Wage Law b. Considerations III. Increased Minimum Wage and Employment c. Job Losses d. Unskilled Workers IV. Increased Minimum Wage and Poverty V. Increased Minimum Wage and Effects for Society e. Costs of Labor f. Higher Prices g. Individual Impacts VI. Constitutionalism h. Previous Court Rulings i. Free Contract VII. Demotivation Factors j. Education k. Promotions VIII. Minimum Wage Redundancy IX. Conclusion The issue of raising the minimum wage is a highly debated topic. This topic is one that appeals to people from all walks of life. During some time in an individual’s life, he has worked for minimum wage. There will always be the worker who feels he is not paid enough and the boss who feels that the worker’s pay is adequate for the work. “If there were only two economists left in the world, they would disagree about the minimum wage” (Mejeur 14). Minimum wage is basically the minimal amount that an employer can legally pay an employee for work on an hourly basis. Past laws governed that the minimum wage would increase every few years, with the last increase being in 2009 for $7.25 per hour (Funk & Wagnalls 1). Many people feel an increase is long overdue. Those people, however, are not looking at the entire picture. Increasing the minimum wage goes beyond simply giving people more money...

Words: 1938 - Pages: 8

Minimum Wage

...Minimum Wage: A Historical Perspective and its’ Future On June 18th, 2004, Senator Kerry announced his minimum wage plan, saying, “I’m running for President to build a stronger economy that lifts up families and expands opportunity for hardworking Americans. Today, there are workers, many of them women, struggling to get by on the minimum wage. That is wrong. We can do better. And together, we are going to change it. I want to build an America where working families can get ahead, where a family working fulltime does not have to raise their children in poverty.” (Burkhauser 1) Classical economists have proven for years that floors and ceilings on prices are bad for economies. So why do politicians, who call themselves progressive, continue to beat the drum of creating a living wage? The reason; to get more votes. A wage floor is strictly a political issue disguised as a social problem needed to help the poor. Raising the minimum wage has taken on a fever pitch in Congress this year, regardless of the fact that there is not a widely accepted empirical economic study suggesting it is the correct policy to assist the working poor. This paper consists of research conducted by the author from both the government activist and laissez-faire positions. In addition to the list of works cited at the end of this paper, several public policy institute web site were reviewed for pertinent material. These sites include: the Heritage......

Words: 3439 - Pages: 14

Minimum Wage

...Another incentive to increase the minimum wage is the fact that living costs simply do not add up for minimum wage workers. That is to say, the current minimum wage simply does not match the current living wage for most of these Americans. A living wage is essentially the income necessary for a person to provide for themselves or their family. In a 2014 article for CUNY’s New Labor Forum, Peter Dreier recalled the introduction of the term “living wage” itself removed stigma attached to low-wage workers because it revealed the problem not as a situation of people who are in poverty due to bad decisions and lack of intelligence or motivation but rather as a situation where mothers, fathers and children’s can’t even make the means to meet their basic physiological needs despite working full-time, (Dreier, 2014). Economists calculate recommended living wages based on the cost of living in a given area and the housing size as well if it is a single parent household. According to the U.S. Department of Labor, the current minimum wage was determined by amendments passed by the Fair Labor Standards Act in 2007 that proposed it would be incrementally be raised to $7.25 per hour effective on July 24, 2009, (U.S. Department of Labor). This rate has not increased since then despite ever-increasing living costs and despite the fact that productivity has risen, where productivity is measured by how much output can be produced in an average hour of work. According to analyst Lawrence Mishel...

Words: 655 - Pages: 3

Minimum Wages

...THE MINIMUM WAGES ACT, 1948 ________________________________________ The need for a country of having minimum wage-fixing machinery was stressed by the International Labour Organisation long back in 1928. Twenty years later our country passed the Minimum Wages Act, 1948. The reason given by the Government for passing the Act was that workers' organisations in the country were poorly developed and consequently their bargaining power also was very poor. Like the Payment of Wages Act, 1936 this Act also is exhaustively amended by many States to widen its scope and application. The Act is a boon to a large number of poorly paid persons in this country. Object of the Act To provide for fixing minimum rates of wages in certain employments Fixation of Minimum Rates of Wages • The appropriate government to fix minimum rates of wages. The employees employed in Para 1 or B of Schedule either at 2 or either part of notification u/s 27 • To make review at such intervals not exceeding five years the minimum rates or so fixed and revised the minimum rates. Government can also fix Minimum Wages for (a) Time work (b) Piece work at piece rate (c) Piece work for the purpose of securing to such employees on a time work basis (d) Overtime work done by employees for piece work or time rate workers {Section 3} Minimum Rates of Wages Such as Basic rates of wages etc. Variable DA and Value of other concessions etc. Sec- 4 Fixing Hours for......

Words: 1471 - Pages: 6

Minimum Wage

...indefinitely on a job that pays $7.25 an hour? That is the national minimum wage set by the Fair Labor Standards Act in 2009. Projecting this to a 40-hour work week over 50 weeks it comes to a total of $14,500 a year. This is just above the U.S poverty level for a family of 2, but below the poverty level of $22,050 for a family of 4. Despite the fact that the minimum wage has been increased 3 times since 2007, it is almost $3.00 below what it was nearly forty years ago in purchasing power. It has not kept up with inflation. If it had, the minimum wage would be $10.74 per hour. In other words, the minimum wage is a far cry from being a living wage which is a wage that is high enough for fulltime workers to provide a decent life for themselves and their families. For the benefit of American citizens and the economy, the minimum wage must be increased! Those opposed to an increase in the minimum wage focus on a number of assumptions suggesting it would be a bad idea. Under close examination, all of their arguments fall apart.   One of the main arguments for not raising the minimum wage is that it is a job killer. The reasoning is the increase in salary decreases profits and results in cutbacks in hiring. However, a study at the University of California, Berkeley, has shown that raising the minimum wage does not have a negative effect on employment. An analysis of those states that independently increased the minimum wage “had job growth slightly above the national average.”......

Words: 1051 - Pages: 5

Minimum Wage

...Minimum wage legislation has been a topic of discussion for many years among economists. The first laws were introduced in Australia and New Zealand in order to protect minimum standard living for unskilled workers. At this point more than 90% of all countries have some kind of minimum wage legislation. However there are countries that do not set the minimum wage among those are: Germany, Finland, Iceland, Italy and other counties. Germany is the largest national economy in Europe. According to Central Intelligence Agency GDP of the country in 2011 is $2.94 trillion with real growth rate of 3.5%. Based on Trade Economic data unemployment rate of Germany in October 2011 was 6.5%. Despite the fact the Germany does not have a set minimum wage the average wages in western Germany is 27.9 euro per hour and 17.4 euro per our in Eastern German (source http://export.gov/germany based on data from 03/2011). The wages there are higher than average wages in European Union or worldwide. Of course there are laws of the German Government that regulate dismissal of workers/maternity leave/ vacation/health benefits; but not minimal wages. Minimum wage is set by the Government in order to protect unskilled workers. It provides employees with guaranteed minimum amount of income from their work to survive and pay their bills. It protects mostly adults from loosing their jobs to teenagers or foreigners that are ready to work for less than a minimum wage. However there are...

Words: 935 - Pages: 4