Social And Employment
How Low Can You Go? The Question of a Minimum Wage.
What It Is and How It Works
The minimum wage is a law that sets the lowest amount of money that employers must pay their employees for work. It is usually in the domestic currency and can be fixed either per hour, per week, per month, or per year. In today's world, approximately 90% of countries on the planet have a form of minimum wage, but the level and interval it is adjusted could vary.
Minimum wage guarantees workers are well paid, especially those with minimal or no experience or skills. When a country raises the minimum wage, workers previously earning less than the amount get an immediate boost in pay. This can also push the wages of already higher-income workers, since the gap between lower-level workers and higher-level workers must be reasonable to avoid unfairness.
►
The Policy’s Impact
The direct impact of raising the minimum wage is that workers who were earning below the new minimum wage see their income rise. This also affects higher wages because when the minimum wage increases, employers often raise the wages of more skilled workers to maintain wage differences. However, there is a downside: when wages increase, employers may have to spend more on labor, which could lead them to raise the prices of goods and services. This might reduce workers' overall benefits from a higher wage because the cost of living increases.
Industries and sectors may also negotiate their own minimum wages, but these must never be lower than the national minimum wage, which is set by law.
►
Stakeholders and Political Implications
The people most affected by the minimum wage are low-skilled workers and their employers. While informal workers (those not working under formal contracts) are not directly impacted, in some cases, they might also benefit indirectly from increases in the minimum wage.
Politically, discussing the minimum wage often involves balancing fairness and the economy's health. Increasing the minimum wage can help workers, but if businesses face higher costs, they may hire fewer people or raise prices, which can have mixed effects.
►
Some Debates Among Economists
There is ongoing debate among economists about the effects of the minimum wage. Some argue that if the labor market worked like any other market, wages should be determined by supply and demand. According to this view, a minimum wage could lead to unemployment, as some people would be willing to work for less than the minimum wage, but employers wouldn’t be allowed to pay them that amount.
On the other hand, many economists believe the labor market is different from other markets. In the labor market, workers (the suppliers) are often in a weaker position than employers (the demanders). Workers may have no choice but to accept low wages to survive, while employers have more flexibility. This makes the labor market unique and requires special rules like the minimum wage to protect workers from exploitation.