Economics
Minimum Wage Laws
Minimum wage laws set the lowest hourly rate that employers can legally pay their employees. The aim is to ensure that workers receive a fair wage for their labor and to prevent exploitation. However, critics argue that minimum wage laws can lead to job losses and reduced employment opportunities, particularly for low-skilled workers.
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10 Key excerpts on "Minimum Wage Laws"
eBook - ePubIncome Disparity In China: Crisis Within Economic Miracle
Crisis within Economic Miracle
- Dianqing Xu, Xin Li(Authors)
- 2014(Publication Date)
- WSPC(Publisher)
After a close scrutiny, things may not be as simple as they seem. The minimum wage is a double-edged sword that can hurt the interests of the poorest people. The minimum wage law is not so bad that it can be considered reactionary. Nevertheless, introduction of the law is untimely.10.2. Minimum Wage in Countries all over the World
The minimum wage system is a means for the government to intervene in the labor market. The system established a bottom line for wages through legal means to ensure that the income of workers can meet their and their families’ basic survival needs.The minimum wage legislation began in the late 19th century when New Zealand introduced the Industrial Adjustment and Arbitration Law, which aimed to solve the labor–management disputes and eliminated the sweat wage through the rule of the minimum wage.The International Labor Organization held the 11th International Labor Conference in 1928 and passed the No. 26 convention or the Convention Concerning the Creation of Minimum Wage-fixing Machinery. The Chinese government approved this convention in 1930 and formulated the first Minimum Wage Law in China, which proposed the lowest wage protection. The regulation was not implemented well because of the chaotic situation then.After World War II, almost all developed capitalist countries and most developing countries formulated their respective Minimum Wage Laws. The International Labor Organization formulated the Nos. 26, 29, and 131 conventions and Nos. 30, 89, and 135 proposals in the form of the international labor law in 1928, 1951, and 1970, respectively, with Nos. 131 and 135 proposals intended for developing countries (Table 10.3 ).In 1984, the Chinese government approved 14 international labor conventions by the former Guo Ming Dang government, including the Convention Concerning the Creation of Minimum Wage-fixing Machinery.4 The Labor Ministry issued the Minimum Wage Ordinance in 1993 and approved the Labor Law in 1994. The different places then established their minimum wages accordingly. After 2004, the central government required the local areas to adjust the minimum wage at least once every two years. “According to the Provisions on Minimum Wages issued by the Ministry of Labor and Social Security in 2004 and the Minimum Wage Regulations issued by the Ministry of Labor and Social Security in 2004, the minimum wage is the lowest compensation that employers may legally pay to workers on the premise that the workers provide the normal labor in the legal working time or within the working time specified in the labor contract concluded in accordance with the law. The minimum wage does not include overtime pay, allowance for middle and night shifts, working in high and low temperatures, underground, or in poisonous and harmful environments, the insurance and welfare provided by the national laws and regulations, or the non-monetary income paid by the enterprises through subsidizing food, housing, etc.”5
eBook - PDFIn Defence of Labour Market Institutions
Cultivating Justice in the Developing World
- J. Berg, D. Kucera, J. Berg, D. Kucera(Authors)
- 2008(Publication Date)
- Palgrave Macmillan(Publisher)
Once it has been set up, a statutory minimum wage fixing system can still carry out functions other than those that fall under collective bar- gaining. This is especially true when it comes to issues within the field of economic policy – be they poverty, wage inequality or employment. 8 The system acquires another dimension which explains, if not justifies, why, once established, the state wishes to retain control over it rather than placing it back in the hands of collective bargaining. That is what this chapter seeks to explore. 6.4 The minimum wage and poverty The main aim of the minimum wage is to protect the lowest wage-earners in order to guarantee them a decent standard of living. This aim represents what is both laudable and ambiguous about the minimum wage. On the positive side, it is an instrument used in the defence of the poorest wage-earners. It is, however, ambiguous because of this very virtue, in that it is often seen as the perfect instrument in the fight against poverty in general, a role that it cannot possibly fulfil in isolation. From the very beginning, the principle of the minimum wage has been that it is an income unconnected with the act of production; it is a sum owed to the worker and essentially linked to the status of the wage-earner. The earliest methods of minimum wage fixing clearly demonstrate this approach. It is irrelevant whether or not an enterprise can pay or if the wage-earner’s output is sufficient; the minimum wage is primarily concerned with how much the worker needs to live on – and not only the worker, but his or her family. No reference is made to the worker’s contribution to the enterprise in terms of production; what counts is whether a worker can provide for himself and his family. When the minimum wage was first introduced in industrialized François Eyraud and Catherine Saget 107 countries, wage-earner productivity was not even an issue.
eBook - PDFLabor Economics From A Free Market Perspective: Employing The Unemployable
Employing the Unemployable
- Walter Block(Author)
- 2008(Publication Date)
- World Scientific(Publisher)
Every Basic Economics 101 159 160 textbook, even those written, paradoxically, by some of the signatories of this document, make this basic elementary point. If there is anything drummed into students taking introductory courses in economics, this is it. For a bunch of economists to reject this is highly problematic. Why, then, do I include this statement in this book, with all the signatories to it, each and every one of them? To make it that much less likely that their behavior will never be forgotten. One of these days justice will prevail, and the eminent reputations of all those who signed this document will be called into question. In the meantime, we must content ourselves with exposing its errors. Let us now consider their missive in some detail. It appears below, in quotation marks. My interspersed comments are in italics. “The minimum wage has been an important part of our nation’s economy for 68 years.” True enough. One of the only very few correct statements in the entire document. “It is based on the principle of valuing work by establishing an hourly wage floor beneath which employers cannot pay their workers.” The minimum wage law does nothing of the kind. It does not at all establish anything, let alone a “wage jlool: ’’ Rathel; it states that it shall be illegal for an employer to pay, and employee to receive (this much is usually a dead letter law insofar as the government will not prosecute the supposed victim of the piece, the low-wage laborer) any amount less than that stipulated by law. But there is no requirement, none at all, that a job, any job, be offered at this wage. A “wageflool;” moreover, implies that when the minimum wage level rises, it pulls wages up with it. @we must use mechanical analogies to economic phenomena, a far better one would be that of the barrier over which one has to jump in order to land a job; and, the higher is this hurdle, the fewer those who can catapult over it.
eBook - PDFMinimum Wages in Central and Eastern Europe
From Protection to Destitution
- Guy Standing, Daniel Vaughan-Whitehead, Guy Standing, Daniel Vaughan-Whitehead(Authors)
- 1995(Publication Date)
- Central European University Press(Publisher)
Minimum Wages in Western Industrialised Economies 1 69 theoretical terms. The impact on employment is more complicated for two reasons. First, effective minimum wages initially compress the lower end of the wage distribution. Among the lowest paid dif ferentials are reduced and in some cases eliminated. If employers and (organised) workers strive to maintain wage differentials in order to reward effort, responsib ility and seniority, minimum wages (and increases thereoO will entail knock-on or ripple effects through the lower part of the wage structure. The impact on labour costs is not confined to an increase in the wages of those directly affected. The second complication arises due to the heterogeneity of the group of workers considered and the possibilities of substitution between different types of worker within the same group. If minimum wages entail a substitution effect between differ ent types of worker within the same group, the overall effect on the group's employment will be negligible. The difficulty of empirically identifying minimum wage workers as a homogeneous group has meant that most studies have examined the impact on the employment of groups or sectors which contain large proportions of minimum wage workers. In fact, the vast majority of empiri-cal studies examine the impact of minimum wages on the employment of young persons. The latter are normally aged 25 or under and typically represent between 30 and 40% of those receiving the minimum wage. Having said that, while young persons, lacking experience and on-the -job training, often start out on low wages they then move up the ladder. Where minimum wage fix ing arrangements are in place it is normal that a large proportion of young persons receive the minimum wage. It must not be overlooked, however, that women workers (young and adult together) consistently make up about two-thirds of the minimum wage population.
eBook - PDFThe Economics of Imperfect Labor Markets
Second Edition
- Tito Boeri, Jan Ours(Authors)
- 2013(Publication Date)
- Princeton University Press(Publisher)
Thus, to address a distortion induced by the bad setting of an institution, another distortion is created. Some adverse effects of minimum wages on unemployment among low-productivity workers can be mitigated when the minimum wage is combined with in-work benefits (see chapter 13). Actually, the combination of minimum wages and in-work benefits is often advocated as a rather effective antipoverty device (Gregg 2000; OECD 2006c), providing wage insurance to those with low earnings. Moreover, a substantial portion of minimum wage earners may not be poor, be-cause other family members have earnings. Thus, the minimum wage may have a 56 2. Minimum Wages low target efficiency, helping many workers in nonpoor families and providing only limited earnings support to the truly needy. 2.6 Why Does a Minimum Wage Exist? Minimum wages can achieve both goals typically assigned to labor market institutions: 1. They can increase efficiency by remedying market failures, such as those deriving from excessive monopsonistic power. 2. They can reduce earnings inequality by supporting incomes of relatively low-paid workers, for example, low-skilled workers. The setting of the minimum wage requires careful fine-tuning if either of these two goals is to be achieved. When the minimum wage is too low, it is ineffective. When it is set at a level that is too high, it reduces welfare and may have perverse effects on income inequality by completely crowding out low-skilled workers from the labor market. The strongest arguments in favor of an increase in the minimum wage rely on equity considerations. However, economic theory also does not provide firm guid-ance on the impact of the minimum wage on poverty.
eBook - PDFWage Inequality in Latin America
Understanding the Past to Prepare for the Future
- Julian Messina, Joana Silva(Authors)
- 2018(Publication Date)
- World Bank(Publisher)
(continued on next page) WAGE INEQUALITY IN LATIN AMERICA: UNDERSTANDING THE PAST TO PREPARE FOR THE FUTURE 162 Despite the many within-country variations, including some that persist in South America, the overall trend is clear—toward a single, unified minimum wage for all. However, this unifying trend is evolving faster in some dimensions and country aggregates than in others. Wage-Setting Mechanisms The usual mechanism for setting the minimum wage is through a tripartite wage council (comprising workers, employees, and government) that suggests the new minimum wage to the labor ministry, which then makes the final decision. There are variations on this theme. In Colombia and Panama, for example, if the wage council cannot reach a decision by consensus, the executive branch, through the labor ministry, may set the new wage by decree. Consensus rarely occurs, so the minimum wage is de facto set by decree. In other countries (for example, El Salvador and Jamaica), the wage council exists only to advise the labor minister, who shoulders the full responsibility for setting the minimum wage. Finally, in many countries (such as Costa Rica, Paraguay, and Peru), the commission sends a majority proposal to the labor minister, who can either accept it or disregard it and set the wage himself or herself. Two exceptions to all of the above are Argentina and Brazil, which are polar opposites in this regard. In Argentina, the National Council of Employment, Productivity, and the Minimum Wage is a bipartite commission of employers and employees with legal power to set the minimum wage The executive does not get involved except to convene the council. In contrast, Brazil has no such commission, and the minimum wage is currently set by a law approved by Congress. The current law states that the minimum wage will increase each year according to either the previous year’s inflation or nominal GDP growth lagged two years, whichever is greater.
- Stefan Legge(Author)
- 2009(Publication Date)
- Diplomica Verlag(Publisher)
Melanie Khamis explains her divergent result by pointing out that workers see the minimum as a reference wage and employers accordingly pay this wage to avoid unmotivated employees. But on the other hand, they do not pay for social security contribution. 13 A major issue in many developing countries is the problem of child labor. Many economists argue that parents send their children to work solely because their own incomes are too small to nourish the family. Therefore, some politicians see minimum wages as a tool for fighting child labor. They argue that if parents receive higher incomes they will send their children to school instead of work places. Kaushik Basu (2000) analyzes whether or not minimum wage policy can effectively reduce child labor. At first, he explains that a general increase in the labor incomes of poor adults will in fact lower the dimension of child labor. But the attempt to artificially raise the adult's incomes by increasing the minimum wage seems to deteriorate rather than improve the situation. If some parents lose their jobs after the minimum wage increase, their dependence on their children's income is boosted. As a result the degree of child labor may increase as Basu writes: Therefore, the suggestion of using a minimum wage legislation in developing countries as a form of international labour standard has the risk of exacerbating the problem of child labour. (Basu 2000, p.60) A study by Neumark, Cunningham and Siga (2006) explicitly analyzes the impact of minimum wages on poor families' incomes. The authors use a before-and-after research design to find out whether or not the minimum wage policy in Brazil raised remunerations of poor families. With a dataset from 1982-2002 they do not find any positive effects of minimum wages on the distribution of incomes. In other words, the minimum fails to achieve its primary goal.
eBook - PDF- Nancy Pindus, Howard Wial, Harold Wolman, Nancy Pindus, Howard Wial, Harold Wolman(Authors)
- 2010(Publication Date)
- Brookings Institution Press(Publisher)
In sum, the mandating of higher wages in a very limited sector of the local workforce might reduce employment there, but the magnitudes of these effects will depend on a variety of market factors and might well be offset by a variety of forces in that market. Evidence on the Effects of Living Wage Laws How are the effects of living wage laws on outcomes such as wages, employ-ment, family incomes, and poverty rates inferred? The literature can be largely divided into two categories: studies of differences across cities that have or have not implemented these laws and studies within cities that compare firms and workers covered with those that are not. In both cases, studies of the effects of these laws are somewhat limited by data availability, especially at the level of the firm. Furthermore, in both cases, major questions exist about identifying comparable workers, from whom the counterfactual wage and employment levels for affected workers in the absence of these laws can then be inferred. Cross-City Studies Most of the studies of the effects of living wage laws that are based on evidence across cities have been generated by Scott Adams and David Neumark. 17 Adams 174 Harry J. Holzer 16. Economists might characterize this situation as one of “asymmetric information,” in which employers know how they intend to respond to the passage of prospective living wage ordinances, but the public does not and can only speculate about that. 17. Their several papers on this issue are summarized in Adams and Neumark (2004, 2005). and Neumark used data from the Outgoing Rotation Groups of the Current Population Survey (CPS-ORG) for their analyses. The CPS-ORG is a large monthly survey of about 50,000 households, used by the federal government to calculate monthly employment rates.
- Maarten van Klaveren, K. Tijdens(Authors)
- 2012(Publication Date)
- Palgrave Macmillan(Publisher)
For India the conclusion is that in practice workers’ rights are legally protected only for the small minority of workers in the organized indus- trial sector (ITUC 2011c; US Dept of State 2011f). In considerable part a lack of transparency is to blame. As the Global Wage Report 2010/11 puts it, “In India, the Minimum Wage Act of 1948 is considered to be one of the most important pieces of labour legislation; but India’s system of minimum wages is also one of the most complex in the world [. ... ] This system has resulted in innumerable minimum-wage rates, which are difficult to monitor and enforce and are not applicable to all workers” (ILO 2010a, 72). Much evidence supports these judgments, as well as that only small shares of employed women earn at least the relevant minimum wage. The Indian National Commission for Enterprises in the Unorganised Sector (NCEUS) computed that 31 per cent of the regular salaried/wage workers did not receive the national minimum wage for 2004–5; at 54 per cent women’s share was more than double men’s (26%). At the same time large majorities of casual wage workers earned (considerably) below the minimum wage: 74 per cent of males and 95 per cent of all females. Both categories of wage workers earn on average considerably more than the large mass of informal and own-account workers (NCEUS 2007, 2009a). Against this backdrop, that current minimum wages, categorized as “maxi”, substantially influence income redistribution and combat (female) poverty is highly unlikely. Nevertheless, India’s situation with the SMW seems gradually improving. There has been recent widespread debate on how a more 164 Empowering Women in Work in Developing Countries effective minimum wage system can be realized. A politically disputed floor-level minimum has been declared. Moreover, a new centrally sponsored scheme providing an amount of guaranteed wage employ- ment (and income) has already impacted quality of life in rural India.
eBook - PDFMinimum Wages and Employment
Static and Dynamic Non-Market-Clearing Equilibrium Models
- C. Ragacs(Author)
- 2004(Publication Date)
- Palgrave Macmillan(Publisher)
Firms with relatively higher wages face a larger supply of labor and are able to attract higher qualified labor. Lang and Kahn (1998) model the labor market as a one-shot game with multiples stages where firms set wages to attract applicants, influencing the probability of filling their vacancies. To increase the probability of getting a job, low-wage workers have to consider that other workers may apply for the same job, setting their wage in such a way that high-wage workers will not apply. The im- plementation of a minimum wage disturbs this decision rule, because then both high and low-wage workers will apply for the same former low-wage job, increasing low-wage employment and decreasing high- wage employment. The authors show that the aggregate effect on employment is positive if the minimum wage is sufficiently low. Swinnerton (1996) proposes that the sign of the employment effect of 26 An Inquiry into the Theory ofMinimum Wages minimum wages crucially depends on the level of the minimum wage, the induced change of the intensity of job search, and the probability of job offers. The outcome of this model depends on the different labor productivities of the firms and on the imperfect information of the unemployed, who tend to search for a job randomly and sequen- tially. In a bilateral search model with heterogeneous workers Burdett and Mortenson (1989) also point out that an increase in minimum wages may attract more and better applicants to low-wage jobs. 5 The basic economic intuition of this model is that identically productive indi- viduals accept every job offer where the wage exceeds the current wage or the reservation wage, respectively. Given equilibrium unem- ployment caused by search costs, the implementation of a minimum wage does not influence employment, because all offers above the reservation wage were already acceptable even before the implementa- tion of the minimum wage occurred.
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