Economics
The National Minimum Wage
The National Minimum Wage is the lowest wage rate that employers are legally allowed to pay their employees. It is set by the government and aims to ensure that workers receive a fair wage for their labor. The minimum wage can vary by country and is often adjusted periodically to keep up with changes in the cost of living.
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12 Key excerpts on "The National Minimum Wage"
- Tito Boeri, Jan van Ours(Authors)
- 2021(Publication Date)
- Princeton University Press(Publisher)
chapter two Minimum Wages T he minimum wage is a labor market institution that sets a wage floor—that is, a lower bound to the wage paid to individual workers. The first minimum wage was introduced in New Zealand in 1894. The United States followed in 1938 when President Franklin D. Roosevelt signed the Fair Labor Standard Act after a long battle with the Supreme Court, which considered the norm unconstitu-tional. The US minimum wage paid 25 cents per hour. In 2020 the federal minimum wage was $7.25, in nominal terms almost 30 times larger but, in real terms, less than twice as much as 80 years ago. In the United King-dom a national minimum wage was introduced as late as 1999 and in Germany in 2015. Although most countries in the world have some form of minimum wage, the scale, eligibility, and operational details change from country to country, so providing a cross-country-comparable definition and mea-sure of the minimum wage is not an easy task. Some statistics, like the ratio of the minimum wage to the median wage or to the average wage, are, however, commonly used to summarize the relevance of the mini-mum wage in affecting the distribution of earnings in different countries. A key difference between the minimum wage and collective bargaining institutions (chapter 3) is that the minimum wage mostly affects the low end of the wage distribution. Because the minimum wage sets a wage floor there may be a spike , a sudden increase, in the wage distribution at the minimum wage. This spike indicates how many individuals are directly affected by the minimum wage. The fraction of the workers affected will vary to the extent that the minimum wage is binding. 55 A large body of theoretical and empirical research examines the effects of the minimum wage. Theory offers clear-cut predictions only in the case of a competitive labor market.
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 - PDFAutomatic Government
The Politics of Indexation
- R. Kent Weaver(Author)
- 2010(Publication Date)
- Brookings Institution Press(Publisher)
1. An earlier minimum wage under the National Industrial Recovery Act was over-turned by a Supreme Court decision that the act was unconstitutional. 2. Finis Welch, Minimum Wages: Issues and Evidence (Washington, D.C.: American Enterprise Institute for Public Policy Research, 1978), p. 3. 173 174 1 A U T O M A T I C G O V E R N M E N T much the same appeal as indexing income transfers to the poor and aged—namely, it protects individuals who have the least market power to maintain their own income. Indexing may also prevent low-income workers from dropping out of the work force if it keeps their real wage from declining relative to public assistance payments. But most econ-omists believe that the minimum wage increases unemployment, es -pecially among low-wage workers. The effect of the minimum wage on low-income workers, they argue, is a complex one: those who are able to obtain employment earn more than they otherwise would, but fewer of them are employed. 3 Workers (notably first-time workers) who lack skills may be excluded from the work force altogether, since the value they can contribute to a product may be less than the wage floor. Pricing low-skill workers out of the market, in turn, contributes to the development of a permanently unemployed underclass. To com-bat this problem, a number of economists and policymakers have pro-posed instituting a subminimum wage for teenagers that would allow firms to employ workers, usually for a limited period, at a wage that corresponds to their productivity. But this proposal has been vigor-ously opposed by organized labor, which fears that it would lead firms to fire adult workers and replace them with teenagers. The minimum wage may also have regional effects, tending to protect jobs and firms in the relatively higher-wage northern states from competition by lower-paid southern workers.
eBook - PDF- Rachel Horton(Author)
- 2022(Publication Date)
- Hart Publishing(Publisher)
terms or conditions of or affecting employment .NATIONAL MINIMUM WAGE ACT 1998 (1998, c .39) Entitlement to The National Minimum Wage 1 Workers to be paid at least The National Minimum Wage (1) A person who qualifies for The National Minimum Wage shall be remunerated by his employer in respect of his work in any pay reference period at a rate which is not less than The National Minimum Wage .(2) A person qualifies for The National Minimum Wage if he is an individual who— (a) is a worker; (b) is working, or ordinarily works, in the United Kingdom under his contract; and (c) has ceased to be of compulsory school age .(3) The National Minimum Wage shall be such single hourly rate as the Secretary of State may from time to time prescribe .(4) For the purposes of this Act a ‘pay reference period’ is such period as the Secretary of State may prescribe for the purpose .(5) Subsections (1) to (4) above are subject to the following provisions of this Act .Regulations relating to The National Minimum Wage 2 Determination of hourly rate of remuneration (1) The Secretary of State may by regulations make provision for determining what is the hourly rate at which a person is to be regarded for the purposes of this Act as remunerated by his employer in respect of his work in any pay reference period .(2) The regulations may make provision for determining the hourly rate in cases where— (a) the remuneration, to the extent that it is at a periodic rate, is at a single rate; (b) the remuneration is, in whole or in part, at different rates applicable at different times or in different circumstances; National Minimum Wage Act 1998
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 - 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)
1 A national minimum wage will leave some enterprises totally unaf-fected and make survi val difficult for others. In order to put the economic impact of minimum wages in perspective, it is first necessary to appreciate their role and how they are seen by enterprises. The notion of a minimum wage implies that without it at least some wage rates would be lower. In a buoyant, fully-emplo yed economy minimum wages would be redundant as enterprises would have to bid up wages in order to satisfy their labour requirements. The argument for minimum wages lies in the existence of groups of workers whose labour is not sufficiently scarce relative to demand. In such circumstances enterprises have the upper hand and can continue to force down wages as long as there are workers still seeking . employment. The role of minimum wages is to prevent enterprises from acting in this manner, protecting those not covered by collective bargaining arrange-ments. Enterprises are unable to enhance their profits or improve their competitiveness by driving down the lowest wage rates. Whether the existence of min imum wages results in lower employment levels depen ds on various factors. Where enterprises can only produce and sell profitably if wages are lower than the minimum wage some employment effects are inev itable. The issue that must then be addressed is whether enterprises, as job creators, should be allowed to pay the low-est wages they can, or whether at the cost of certain activities being rendered unprofitable, the most vulnerable employees should be afforded protec-tion. Where enterprises can pay higher wages in the absence of minimum wage protection, there will clearly be no reduction in employment so long as the minimum wage is set at a reasonable level. In general, the higher the min imum wage the greater the risk of employment being reduced.
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 - PDFIndustrial Relations
Theory and Practice
- Paul Edwards(Author)
- 2009(Publication Date)
- Wiley-Blackwell(Publisher)
LOW PAY AND The National Minimum Wage 447 17 LOW PAY AND The National Minimum Wage JILL RUBERY AND PAUL EDWARDS Low Pay in Britain Earnings inequality in the UK widened persistently and markedly over the final two decades of the twentieth century (OECD 1993, 1996; Bazen et al. 1998), more than offsetting the trends towards more equal earnings distribution in the 1970s (Machin 1999). This increase in earning inequality resulted both from a rising share of relatively well-paid workers and a rising share of low-paid workers. That is, the gap between the top of the earnings distribution and the median, and the gap between the median and the bottom, both grew. The growth of low pay was associated with various labour market developments, including: a much higher level of unemployment than that which prevailed up until the end of the 1970s; a growth of service sector employment; a continued growth in part-time jobs; and finally a major increase in the share of the labour force whose pay was determined by management without the protection of minimum wage standards established by voluntary agreement or by legal regulation. As noted in chapter 8, by the middle of the 1990s there were more employees who were outside the voluntary collective bargaining system than employees covered by collective bargaining, and all forms of legal minimum wage protection had been abolished, except for those covering agricultural workers. It was against this background that the Labour government was elected in 1997 with a mandate to introduce a National Minimum Wage, and it was only in 1999, the first year in which a National Minimum Wage was implemented in the UK, that there was any evidence of a reversal of this trend towards greater inequality. Definitions of Low Pay Low pay is necessarily a relative concept.
eBook - PDFThe Economics of Imperfect Labor Markets
Second Edition
- Tito Boeri, Jan Ours(Authors)
- 2013(Publication Date)
- Princeton University Press(Publisher)
As documented by table 2.1, the United Kingdom has a ratio of minimum to median wage located roughly in the middle of the distribution of European countries. Stewart compared employment outcomes of individuals just above the minimum wage and higher up the wage distribution before and after the introduction of the minimum wage. He repeated this exercise for different demographic groups (males and females in dif-ferent age groups) and controlled for cyclical conditions. Stewart found no adverse effect of the introduction of the minimum wage in Britain for any of the demo-graphic groups considered. Draca et al. (2011) also exploit the introduction of The National Minimum Wage in Britain in 1999 to study its economic consequences using a difference-in-differences approach. They focus on the effects of the minimum wage on profits and productivity of firms. Their study is discussed in some detail in box 2.3. BOX 2.3 Minimum Wages and Firm Profitability Mirko Draca, Stephen Machin, and John van Reenen study the impact of mini-mum wages on firm profitability, exploiting the changes induced by the introduc-tion of a UK national minimum wage (NMW) in 1999. Using firm-level data, they are able to exploit a difference-in-differences approach. They distinguish two types of firms—low-wage and non-low-wage firms—and pre-NMW and post-NMW periods. The pre-NMW period corresponds to the three financial years from April 1, 1996, to March 31, 1999, and the post-NMW period refers to the three financial years from April 1, 1999, to March 31, 2002. Low-wage firms are defined as firms with an average wage equal to or below 12,000 pounds per year in the pre-policy financial year up to March 31, 1999. Non-low-wage firms have average wages be-tween 12,000 and 20,000 pounds in the pre-policy financial year up to March 31, 1999. The general idea is that the introduction of the minimum wage will have an effect on low-wage firms but no effect—or a much smaller effect—on non-low-wage firms.
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.
eBook - PDF- L Engelbrecht, A Strydom, L Engelbrecht, A Strydom(Authors)
- 2014(Publication Date)
- Future Managers(Publisher)
In economics terms, wages can be defined as that portion of the national product that represents the aggregate paid for all contributing labour and services as distinguished from the portion retained by management or reinvested in capital goods. Module 2 42 FutureManagers 4.2 Money wages and wages Nominal wage By nominal wage is meant the total amount of money earned by a person during a certain period. For instance one employs a labourer and pays him R3 000,00 per month for the services he renders. The amount which is paid in terms of money only is known as money wage, or nominal wage. Real wages Real wages refer to the total amount of satisfaction which a worker receives, by using the nominal wage to pay for necessities, comforts and luxuries, as well as any other benefits derived from the job. Real wages generally include money wages and other facilities like free clothing, free housing, free accommodation, free electricity etc. If we are to judge the standard of living of the masses it can be estimated not from the nominal wages of the workers but from the real wages. In the words of Adam Smith, the labour is rich or poor, is well or ill rewarded in proportion to the real not nominal wages of the labour. Factors determining real wages If we are to determine the real wages of a labourer the following factors should be taken into consideration: • Purchasing power of money: The purchasing power of money does not remain the same. It fluctuates from time to time. When the prices of commodities go up, the purchasing power of money falls and when the prices fall, the purchasing power of money rises. The real wages of a labourer depend upon the purchasing power of money. If the nominal wages are quite high and prices are low, then we can say that the real wages of labour are high but in the case where the cost of living is high, then the real wages will be low.
No longer available |Learn more- United Nations Economic Commission for Latin America and the Caribbean(Author)
- 2018(Publication Date)
- United Nations Publications(Publisher)
These studies include empirical evidence for the United States, some countries of the Organization for Economic Cooperation and Development (OECD), Latin America and Indonesia. The authors concludes that, in general, a rise in the minimum wage reduces employment for less skilled workers. In particular, Neumark and Wascher found wage elasticities of employment ranging from -0.1 to -0.3. Later, Dube, Lester and Reich (2010) generalized the approach used by Card and Krueger (1994) and made use of differences in wage policy between neighbouring states in the United States to estimate minimum wage effects on income and employment in restaurants and other sectors with a predominant proportion of low-income workers. As well as using a larger number of observations (variations in 1,381 counties), one of the advantages of this study was that the information available covered a longer time period (from 1990 to 2006), which enabled the authors to estimate the long-term effects. Dube, Lester and Reich (2010) concluded that the large negative elasticities obtained in the traditional specifications were due mainly to differences (regional and local) in employment trends that were not related to minimum wage policies. These authors nevertheless found similar results to those of Card and Krueger with regard to employment (that is, a zero impact) and notably positive effects on income. The interest on the effects of the minimum wage on employment are not limited to the United States. Stewart (2004) analysed the impacts of the introduction of a national minimum wage in the United Kingdom in April 1999, and its subsequent increases in 2000 and 2001. Stewart used 2 For a more comprehensive literature review and discussions of the possible impact of the minimum wage on other variables (including price levels) see Campos Vázquez (2015). The discussion of the literature in this section is partly based on that paper.
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