MinimumWage and its Implication on Employment
Minimumwage has been implemented in most of the countries. However, thereare different effects depending on some anthropological and societalfactors such as culture and standard of living. There are two waysto describe and characterize the minimum wage. First, minimum wagecan be defined as the lowest daily or hourly pay that the employersgive to their laborers. Minimum wage can also be defined as thelowest value that the laborers can sell their service to theemployers. Minimum wage is an important law that should be studiedbefore implementation of the government. (Neumark & Wascher,1993)
Thereare also two different conclusions about the minimum wage effects onsocial and economic theories. The studies are supported by the marketvalue theories and empirical analysis though quantitative andqualitative experiments. There are supporters that argue about thebenefits of minimum wage laws. They believe that minimum wage canincrease the worker’s standard of living by reducing poverty andinequality by increasing the opportunities for jobs and businesses.The low wage laborers are the ones who argue to increase the minimumwage. They argue that minimum wage has an effect on the increasingpoverty though increasing unemployment especially to the low wageworkers and its damage to most of the businesses. (Neumark &Wascher, 1993)
Theimplications of the minimum wage are now a national issue and thegovernment have several studies concerning whether there should be afloor price on the labor. Minimum wage could not be easily removedalthough there are options whether to increase or decrease theminimum wage. For the changes in the minimum wage law, one approachis that the change can imply differently on variety of options. Forexample, the minimum wage should be only increase up to 2 % for thecompanies which rely on low wage workers to adapt and be ready forthe changes. In the end, the implication of the options can bereadily observed through the GDP or GDP of the nation. (Fusch, et.Al, 1998)
Mostof the non-profit organization pressures the multinational companiesto set the minimum wage using the standard of the third worldcountries. The minimum wage can also be set using the standard livingcondition of any country using the GDP per capita and the ceiling orfloor of the income tax that is implemented by the government. Insetting the minimum wage, several indicators must be considered bythe government. The most usual indicator of the minimum wage is setusing the law of supply and demand of the laborers of certain countryor district. The minimum wage is governed based on the quantity oflaborers. It aims to minimize the loss of the quantity of laborerswhile continuing the global standards of the competitiveness ofeconomic sectors of the countries or districts. Other factors canalso be considered in implementing the minimum wage such as laborersquantity, amount of bankruptcies and prevailing average wage rate.(Stevans & Sessions, 2001)
Themost used theory about the minimum wage is the balance of supply andthe demand of the laborers for the setting and implementation ofminimum wage. It is a basic knowledge used in economics to set theminimum wage using the supply and demand curve and the analysis isalso based using the equations involved in the curve. Using the basicknowledge of the supply and demand effects, it can easily concludethat the minimum wage laws will have an effect in employment. Theobvious result of minimum wage implementation is the decrease inemployers offering higher wage for the laborers. The implementationwill also result to the increase in the number of laborers searchingfor jobs offering higher rates. The imbalance will cause selectivityprocess in the companies and will decrease the number of employerssince they will focus on searching for laborers which is more skilledand more experienced. The oppositions of the minimum wage used thetheory of supply and demand to argue that the effect of minimum wagewill be observed mostly on the low wage workers. They argue that theminimum wage will give the least value of service that the laborerscan offer. (Addison & Blackburn, 1999)
Theminimum wage effects can also be interpreted using empirical studies.The studies where based on quantitative and qualitative studies usedby economist to interpret the effects of minimum wage on social andeconomic values as well as other effects such as behavioral,employment and income. Using the empirical approach, the minimum wageimplementation has two effects. Using empirical studies, minimum wagehas an effect on the standard of living of a certain country ordistrict. It will increase the standard of living by making the lowpaying jobs to increase their income and savings that would result tofamily income to go beyond the poverty threshold. (Burkhauser &Sabia, 2007)
Thetheory is simple, since the minimum wage is implemented using themarginal cost of every service that can be offered, and accompaniedby the standard of living, the minimum wage is set for the laborersto have enough savings for future use. The other approach of theempirical studies shows that there will be fewer opportunities forthe laborers to seek for jobs since more business relying on minimumwage is less stable thus, the laborers cannot mostly rely on them.The implementation of the minimum wage will also result to the stopand closure of most of the small business relying on minimum wageresulting to more unemployment and increase in poverty. (Addison &Blackburn, 1999)
Inthe conventional approach, the use of the minimum wage has alsodifferent effects based on the existing theories accompanied byempirical approach. The first is that the minimum wage will increasethe laborers cost for producing the products. The increase ofproducing the products also increases the price of products thusresulting to decrease in their demand. The decrease in demand willresult for employers to reduce their number of laborers resulting tounemployment. However, some of the analysis shows that the minimumwage can boost the employers to hire more laborers due to the lowcost thus increasing the employment. More quantitative andqualitative analysis can show the true effect of the minimum wage.(Gundersen, Ziliak, 2004)
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