History and Debate of Minimum Wage
Minimum wage is defined as the lowest amount that employers can legally pay their workers per hour of labor. Most jurisdictions do have laws in place to enforce a minimum wage. However, there are both benefits and drawbacks of this type of policy. Many supporters of minimum wage say that it increases the standard of living and keeps people out of poverty. Those who are opposed to it tend to believe that it increases unemployment and harms the less skilled workers.
The first minimum wage law was passed in New Zealand in 1894. Since then, many other nations
have adopted similar policies. In the United States, the current minimum wage is $7.25. The state of Washington has chosen to establish a higher minimum wage of $8.67. These rates are not established randomly. In fact, they are the result of much research in the areas of economics, standard of living and inflation. Labor supply and the effects of rising unemployment are also considered when establishing minimum wage.
Minimum wage laws were established and are upheld with certain goals in mind. Those who support minimum wage laws usually believe that these goals are being adequately achieved and that this alone is enough justification to keep the laws in place. Minimum wage was initially established to reduce poverty. Establishing a minimum wage in the United States helped do away with sweat shops and insures that people are paid properly for their work. Minimum wage also protects younger workers and minorities from being paid less than others to some extent.
Proponents of Minimum Wage
Many do believe that minimum wage laws achieve these goals. They do ensure that workers on the low end of the pay scale are not underpaid because of their gender or race. They also do ensure that workers are given a fair wage. However, their effect on society as a whole and on those who are not currently employed is questionable. Supporters of minimum wage also believe that a minimum wage stimulates consumption and thus puts more money into the economy by allowing low paid workers to spend more. They also believe that it may increase the work ethic of those who are paid little and thus benefit employers. It also encourages people to join the work force, rather than seek other illegal means of earning money such as selling drugs or prostitution.
Opponents of Minimum Wage
Some people who are opposed to the idea of minimum wage believe that it is not accomplishing the goals it was designed to meet. In several instances, employment has decreased more than the increase in wages and thereby overall earnings are still reduced. Businesses are sometimes forced to hire fewer employees because they must pay minimum wage. Thus, fewer people have a job. Studies also show that very few low-wage workers actually come from families in poverty. Thus, minimum wage is more often imposed on the sixteen-year-old worker with his first job than on people who would otherwise be unemployed.
Other opponents of minimum wage believe that it can cause price inflation as businesses must raise their prices to accommodate the higher wages. They also believe it discourages further education of the poor. The United States currently has laws in place to ensure a minimum wage. Whether or not these laws should remain in place is a matter of debate. There are benefits and downfalls to minimum wage laws and nothing is cut and dry.
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Minimum wage have helped many improvements in various situation and stimulate the economic growth.
ReplyDeleteA minimum wage guarantees the amount of earning a worker will received at the end of the month, this can allow the workers to have a better future outlook and save moneys, without a minimum wage a company could hire people for unreasonable wage in the seek of continuous profit for the company or take advantage of people not aware of economics changes.
The minimum wage can also use as Benchmark for workers to ask for a decent wage and also for employers who can offer higher wages in order to attract potential talented worker and with a good educational background who are asking for a higher wage in general.
Minimum wage can also reduce the “flexibility” of a country, employer cannot hire employee at low cost and can reduce employment rate, but prevent “poor-worker” and guarantee some rights for the workers.
A minimum wages may help a company in deciding the standard for the amount of earning worker will receive in the end of a period. Without a standard it will be difficult because so many workers would ask question about their wages. Without minimum wages some employee will be given unreasonable wages , what standard does company use ? , why the amount is different ? This is why the use of minimum wages is very crucial. It helps the economic player to deal with the economic standard.
ReplyDeleteThere are also the negative side of the application of the minimum wages. American Economic Review provides new evidence that increases in the minimum wage reduce employment in the long run ( Forbes ). Their estimates indicate that a 10% increase in the minimum wage causes a decline of 1–2% in employment among teenagers and a decline of 1.5–2% in employment for young adults ( David Neumark , William Wascher 1992 ). Somehow many economists are still arguing whether minimum wages is the best way to increase the welfare or not at all.
In my opinion, the minimum wage is effective to set a living standard of a country. As we all know that nowadays, many companies would go find countries where their minimum wage for labor is very low, as low as less than a dollar. We can see that China has become a hotspot for these companies willing to find low-cost labour. As I said previously that the appearance of a minimum wage is effective to set a living standard of a country because it is to ensure that the minimum wage can at least have a purchasing power to buy necessity goods. For instance, we can take Indonesia as an example of a country setting a minimum wage rate. The minimum wage rate in Indonesia varies by its province, due to the living standards of each area. DKI Jakarta, as the capital city of Indonesia, has the highest minimum wage rate of Rp3.648.035. While Yogyakarta has the lowest minimum wage rate of Rp1.454.154. Now we can see that the minimum wage rate of these 2 areas varies because DKI Jakarta has a higher living standard since it is the capital city of Indonesia.
ReplyDeleteThe debate between the proponents and opponents of minimum wage is in essence a debate between two opposing economic schools of thought; Keynesians who advocate government intervention, and Neo-Classicals (or Monetarists) who advocate for minimal government intervention. The former operates on the assumption that the optimal output of the economy needs to be achieved through the help of government intervention, or, in other words, the economy is unable to allocate resources by itself efficiently. The latter works on the assumption that the economy (and markets in general) are better off to be left alone, since it is able to allocate resources by itself efficiently. However, the nature of the debate is hard to objectify since both sides of the spectrum mostly rely on model building, which in turn relies on assumptions. This makes the arguments look less like ideas based on reasoning and more based on faith, since both sides are reluctant to give up their faith on their respective assumptions in building macroeconomic models.
ReplyDeleteMinimum wage is important because they help provide enough money for the lower and/or working class in order for them to fulfill their basic needs. It should be a right for everyone to have enough money to purchase their needs in order to continue living. Even if minimum wage benefits more towards the younger generation, the population will have more buying power and help improve the economy. While it is true that the application of minimum wage might lead to inflation, but it is an essential step a country must take in order to evolve and improve the country.
ReplyDeleteWithout the implementation of minimum wages, firms may abuse their power and exploit their laborers to the point of overexerting themselves and underpay them. This would then lead to the widening of the gap between the upper class and lower class, where the rich will get richer and the poor remains poor. Employees might also be discriminated against through their wages, where one employee might get paid higher for the same job simply because of their racial and cultural background or gender.
According to the article posted above, I found out that the Australians, in terms of negotiating, are very direct. However, to achieve a result, the negotiations are filled with casualness and modesty. They tend to be a bit more relaxed, comparing to the Thais, as banter is more likely to happen along the negotiation process. On the other hand, I have concluded that the Thais are stricter in terms of negotiation as anyone with who negotiates with them is being told to be flexible and patient. They also are very proud with their culture, therefore, if you are able to speak a little of their language, it will certainly impress them. Unlike the Australians, in which requests are consulted with the top management, propositions requested to the Thais will have to be discussed by few layers before it finally reaches the top management. However, both Australians and Thais values short periods of getting to know you before the real business discussion starts.
ReplyDeleteMinimum wage is considered a good thing by many people because it forces companies to pay their workers at a decent amount that could help them with their daily lives. In addition, it stops companies from exploiting their human resources by paying them a really low wage simply because they know that the workers cannot leave the job even if they are paid poorly because of their limited skills so it might be difficult for them to find a new job. On the other hand, some argue that the implementation of minimum wage could actually worsen the economic condition. This is because many companies feel objected to pay the specified amount as it will increase their costs and reduces their profit. The result of this, the companies will simply make some of their employees redundant because they cannot afford the minimum wage and this could lead in an increase in the number of unemployment.
ReplyDeleteThe discussion whether minimum wage should be implemented in an economy is highly debatable. There are a lot of positives and some negatives if labours are given minimum payment for the work they do. From my point of view, implementing this policy is necessary for a country. There are some reasons to backup this statement. The first and main reason is because by placing the minimal standard for wage, the purchasing power of these less skilled workers will rise; and as they have more purchasing power, increase in living standards and economic growth will follow. Second, implementing this policy will also reduce the level of criminality as said on the fourth paragraph of this article. Giving fair wage for labour would motivate unemployed people to look for a job as they know that they would be paid fairly. Although I really support the implementation of minimum wage, I agree that there are some drawbacks like discouragement of further education for the poor as mentioned in the article.
ReplyDeleteGovernment policy plays a big role in the market and industry. In theory, a market without a government to set the regulations is a free market, and a free market does not always mean a fair one. We can imagine if there is actually no government to impose the policy on labour wages; companies and firms are at the full control of the wheel as to how they allocate the salaries and wages expense for the human capital (Labour). Minimum wage in theory, will not always stay at a constant value because there are always other factors that contribute to the market force that affects how society handles scarcity; labour unions are a major pressure group to the government and companies, and at the same time, their status as human capital cannot be sidelined because in their absence, production are less likely to run, let alone trade. And also one of the Ten Principles of Economics which stated that people react to incentives must be taken into account; of course giving workers more money in exchange to the same amount of work may sound awful for companies, but let’s just assume that the workers demand the minimum amount and the government agrees to it and imposes a minimum wage, it may sound normative but for these workers who were paid less than they deserved and now they get the wage they deserve, the odds are likely that a wage increase to the minimum value will spike up their performances.
ReplyDeleteWage, a sum of money that someone receive upon his works of service in a company. It is very interesting topic, I want to talk about it especially wages in Indonesia. From my course with Sir Amir, Introduction to Economics lecturer, the wage should be determined not only by two parties, but also the third one that can maintain the justice and fairness which is Government. If the wages are determined between the two parties, the possibilities of being unfair is very high; it is depended on who has more bargain power. For example, some cases which are the labor that work in construction, they do not have any choice but to accept what their supervisor give to them or maybe ask for more but not that much; or they can choose to starve. Therefore, it is so important for government intervene this cases by putting “UMR” or minimum wage for labor. Minimum wage for each area is different between each other too, it is determined by living cost on certain area. I think it is very interesting thing to know about how our government’s invisible hands do their works, especially in Indonesia, where their hands are seem to be a little bit too invisible.
ReplyDeleteMinimum wage can have different effects on a state depending on its sovereignty and what the status of the socio economic is. For example, maybe in America it does not have that good of an impact to the citizen because of various reasons but if we look at it in Indonesia, it has such a big impact because what it targets is the fact that there are so many people that are forced to work under harsh conditions but only being paid enough to buy one portion of rice in a dodgy area. The main target of a minimum wage is to increase the prosperity of labour in Indonesia. And from what we can see actually really helps from preventing those horrible things from happening. Can we imagine Indonesia without minimum wage and having people to kill themselves just to be able to buy one portion of rice for a month? It can depend on the situation but in Indonesia, it has changed so much and there are close to no debates whether it is bad or not because so far, it shows that the prosperity have increased.
ReplyDeleteMinimum wage is required for the low-paid workers to; at least, meet the living standard of the region or country. The system is being established to prevent exploitation on workers that are paid inappropriately. I would like to respond a claim argued by the opponents on the following sentences. Despite their salary, people have their own working capacity, which is based on biological matter, such as intelligence and agility. When there is no minimum wage, this biological working capacity stays the same. Due to its intention to generate more profit and less loss; a company will try to leaner its business through maximizing the potential of its employees to prevent wasting money on hiring unproductive workers. The number of workers hired will be the same as the working capacity of each person won’t change at all. The ideal condition of more workers being hired when no minimum wage is applied will be unlikely happened in the first place. Thus, no urgency exists for the opponents to remove the minimum wage.
ReplyDeleteI would say that I agree with the presence of a minimum wage. Although minimum wage differs across countries and even regions in Indonesia, the minimum wage is able to show the minimum living cost a person needs. This can also prevent the fact that some firms may actually pay their employees below the minimum wage, which used to be an issue in several countries where there are underpaid labor. However, some people in Indonesia are earning the minimum wage, whereas they have a family that they are responsible for. In Jogja, the city with the lowest minimum wage in Indonesia only sets Rp 1,454,154 per month, which is equivalent to $97, and an average of approximately three dollars per day to feed the whole family with food, provide shelter, and pay for their children's education. I do think that although the living cost in Jogja is low, the government should also put more effort into enhancing the region's economy so the minimum wage can actually increase in order to provide better earnings and opportunities for families who are earning the minimum wage.
ReplyDeleteSo pretty much wage is a fixed regular payment that typically paid on weekly or daily basis that workers receive for doing their work and Minimum Wage is a minimum standard used by employers or industry players to provide wages to workers in the business environment or work. Because the fulfillment of decent needs in each province is different, so every area has to have a different minimum wage for its workers. For me minimum wage will definitely help the economic growth of an area, because for example if the minimum wage is raised, it will definitely help workers to earn more money from their job, and also automatically opens new job opportunities. So it means it will also decrease the number of unemployment, higher wages also increase tax revenues, so minimum wage definitely has a lot of pros that can improve the economic situation of an area.
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