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A minimum wage is the lowest hourly, daily or monthly wage that employers may legally pay to employees or workers. Companies law (or the law of business associations) is the field of Law concerning business and other organizations A corporation is a separate legal entity usually used to conduct business Generally a company is a form of Business organization. The precise definition varies For partnership in cricket terminology see List of cricket terms A partnership is a type of Business entity in which partners In the commercial and legal parlance of most countries a general partnership or simply a Partnership, refers to an association of persons or an unincorporated A limited partnership is a form of Partnership similar to a General partnership, except that in addition to one or more general partners (GPs there are A limited liability partnership (abbreviated as LLP) has elements of Partnerships and Corporations. A sole proprietorship, or simply proprietorship ( Benjamen Clark An S corporation or S-corp, for United States federal income tax purposes is a Corporation that makes a valid election to be taxed under Subchapter S of A C corporation (or C corp) is a Corporation in the United States that for Federal income tax purposes, is Taxed under and Subchapter C ( et A limited liability company (abbreviated LLC or LLC) in the law of the vast majority of the United States is a legal form of business Company The limited liability limited partnership (LLLP is a relatively new modification of the limited partnership a form of Business entity recognized under U A Series LLC is a special form of a Limited liability company that provides liability protection across multiple "series" each of which is theoretically protected A Nevada Corporation is a Corporation chartered under the Laws of the U A Massachusetts business trust or MBT is a legal trust set up for the purposes of business but not necessarily in the state of Massachusetts. A limited company in the United Kingdom is a Corporation whose liability is limited by law A private company limited by shares is a type of company incorporated under the laws of England and Wales, Scotland, that of certain Commonwealth countries In British or Irish Company law, a company limited by guarantee is an alternative type of Corporation used primarily for Non-profit A Public Limited Company ( PLC, plc or plc or p l c is a type of Limited company in the United Kingdom or the Republic of Ireland which is A proprietary company is a form of Corporation in Australia that is limited by Shares. A community interest company (CIC is a new type of company introduced by the United Kingdom government in 2005 under The Community Interest Act 2004, designed The European Economic Area ( EEA) came into being on 1 January 1994 following an agreement between member states of European Free Trade Association (EFTAthe The Council Regulation on the Statute for a European Company of the European Union was adopted October 8 2001. TemplateExpert and TemplateExpert-subject, has been modified to include two WikiProjects and Portals (Expert-subject is limited to Aktiebolag (literally " share Company " or " Stock Company " is the Swedish term for " Limited Aktiengesellschaft ('aktsiəngəzεlʃaft abbreviated AG) is a German term that refers to a Corporation that is limited by shares i An ansvarlig selskap is a Norwegian personal responsibility Company model mainly used in small-to-medium businesses which translates directly into "Responsible An Aktieselskab (abbreviated A/S) is the Danish name for a Stock -based Corporation. Aksjeselskap is the Norwegian term for a Stock -based Company. Gesellschaft mit beschränkter Haftung ( GmbH) is a type of legal entity very common in Germany (where it was created in 1892 Austria nl '''''Naamloze Vennootschap''''' (usually abbreviated NV) is the Dutch term for a Public Limited liability Corporation. Osakeyhtiö, literally a " stock company " is the Finnish equivalent of a Limited company ( Ltd or LLC) or Gesellschaft For the art organization see Société Anonyme (art SA generally designates Corporations in various countries mostly those employing There are many types of business entity defined in the legal systems of various countries Corporate governance is the set of Processes customs Policies, laws and institutions affecting the way a Corporation is directed administered or controlled Limited liability is a concept whereby a person's financial Liability is limited to a fixed sum most commonly the value of a person's investment in a company or partnership Ultra vires is a Latin phrase that literally means "beyond the powers" The business judgment rule is an American Case law -derived concept in Corporations law whereby the "directors of a corporation. The internal affairs doctrine is a Choice of law rule in Corporations law. De facto corporation and corporation by estoppel are both terms that are used by Courts to describe circumstances in which a business organization that has The corporate law concept of piercing (lifting the corporate veil describes a legal decision where a shareholder or director of a Corporation is held liable for the The Rochdale Principles are a set of ideals for the operation of Cooperatives. A contract is an exchange of promises between two or more parties to do or refrain from doing an act which is enforceable in a court of law Civil procedure is the body of law that sets out the process that Courts will follow when hearing cases of a civil nature (a " Civil action " as opposed to A wage is a compensation workers receive in exchange for their labor. First enacted in Australia and New Zealand in the late nineteenth century,[1] minimum wage laws are now enforced in more than 90% of all countries. For a topic outline on this subject see List of basic Australia topics. New Zealand is an Island country in the south-western Pacific Ocean comprising two main landmasses (the North Island and the South Island [2]

Both supporters and opponents of the minimum wage assert that the issue is a matter of ethics and social justice involving worker exploitation and earning ability. Social justice, sometimes called civil justice, refers to the concept of a Society in which Justice is achieved in every aspect of society rather than The term " exploitation " may carry two distinct meanings The act of utilizing something for any purpose [1] Supporters claim that increases in the minimum wage increase workers' earning power and protect workers against employer exploitation. Opponents claim that increases in the minimum wage increase unemployment, and that (1) the reduction in earning power due to the unemployment outweighs the increase in earning power among minimum wage workers who remain employed, while (2) businesses effectively exploit the unemployed minimum wage workers by transferring their former wages to the minimum wage workers who remain employed. Unemployment occurs when a person is available to work and currently seeking work but the person is without work.

Contents

Minimum wage law

Main article: Minimum wage law

Minimum wage laws vary greatly across many different jurisdictions, not only in setting a particular amount of money (e. Minimum wage law is the body of Law which prohibits Employers from hiring Employees or Workers for less that a given hourly daily or monthly g. US$5. The United States dollar ( sign: $; code: USD) is the unit of Currency of the United States; it has also been 85 per hour under U. S. Federal law, or £5. The Pound Sterling ( symbol £; ISO code: GBP) subdivided into 100 pence (singular penny) is the Currency 52 (for those aged 22+) in the United Kingdom), but also in terms of which pay period (e. g. Russia and China set monthly minimums) or the scope of coverage. For instance, not all workers may be paid a full minimum wage, because exceptions may be made for teenagers or those under 21. Some jurisdictions allow employers to count tips given to their workers as credit towards the minimum wage level.

North America

Main articles: List of minimum wages in Canada and Minimum wage in the United States

Australia and New Zealand

Australia

Australia's minimum wage system has its origins in the 'Harvester Judgment' of 1907. Under the Constitution of Canada, the responsibility for enacting and enforcing Labour laws including minimum wages in Canada rests with the ten provinces List of US state minimum wages The federal Minimum wage in the United States has been $6 Ex parte HV McKay (The Harvester Judgment (1907 2 CAR 1 was delivered in the Australian Commonwealth Court of Conciliation and Arbitration by H

A 2005 study found that the Australian federal minimum wage was 58% of the median wage, compared to 45% in the UK and 34% in the U.S.[3] The typical minimum wage worker is in a middle-income household. The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom, the UK or Britain,is a Sovereign state located The United States of America —commonly referred to as the [4]

In Australia, on 14 December 2005, the Australian Fair Pay Commission was established under the Workplace Relations Amendment (WorkChoices) Act 2005. For a topic outline on this subject see List of basic Australia topics. Events 1287 - St Lucia's flood: The Zuider Zee sea wall in the Netherlands collapses killing over 50000 people Year 2005 ( MMV) was a Common year starting on Saturday (link displays full calendar of the Gregorian calendar. The Australian Fair Pay Commission (AFPC is an Australian legislative body created under the Howard Government's " WorkChoices " industrial The Workplace Relations Act 1996 as amended by the Workplace Relations Amendment Act 2005, or WorkChoices, which came into effect in March 2006, was the most It is the responsibility of the commission to adjust the standard federal minimum wage[5], replacing the role of the Australian Industrial Relations Commission that took submissions from a variety of sources to determine appropriate minimum wages. As of 2007, an unskilled labourer earns $13. 74 per hour or $522. 12 per week. [6]

New Zealand

In New Zealand the Government has decided to raise the minimum wage and abolish the youth wage (16 - 17 years olds) from April 1, 2008. Events 527 - Byzantine Emperor Justin I names his nephew Justinian I as co-ruler and successor to the throne 2008 ( MMVIII) is the current year in accordance with the Gregorian calendar, a Leap year that started on Tuesday of the Common The minimum wage will rise from $11. 25 to $12 per hour. That’s $96 for an eight hour day, or $480 for a 40 hour week.

From 1 April 2008, the training wage will rise to $9. Events 527 - Byzantine Emperor Justin I names his nephew Justinian I as co-ruler and successor to the throne 2008 ( MMVIII) is the current year in accordance with the Gregorian calendar, a Leap year that started on Tuesday of the Common 60 an hour before tax. That’s $76. 80 for an eight hour day, and $384 for a 40 hour week. The training wage applies to people doing recognised industry training involving at least 60 credits a year.

Economics of the minimum wage

Economic theory analyzes the effects of minimum wages within the context of labor markets (c. f. labor economics). Labour economics seeks to understand the functioning of the Market and dynamics for labour. In a labor market, workers supply their labor, which is sold for wages, and employers demand labor.

The neoclassical economic argument views the labor market as perfectly competitive. In perfectly competitive markets, the market price settles to the marginal value of the product. Therefore, under the perfect competition assumption, in the absence of a minimum wage, workers are paid their marginal value. As is the case with all (binding) price floors above the equilibrium, minimum wage laws are predicted to result in more people being willing to offer their labor for hire, but fewer employers wishing to hire labor. A price floor is a government- or group-imposed limit on how low a price can be charged for a product In Economics, economic equilibrium is simply a state of the world where economic forces are balanced and in the absence of external influences the (equilibrium values of economic The result is a surplus of labor, or, in this case, unemployment. Unemployment occurs when a person is available to work and currently seeking work but the person is without work.

Supply of labor curve

The amount of labor that workers supply is generally considered to be positively related to the nominal wage. Economists graph this relationship with the wage on the vertical axis and the quantity of labor supplied on the horizontal axis. The supply of labor curve then is upward sloping, and is shown as a line moving up and to the right.

The upward sloping labor supply curve results from the fact that, as wages rise, people in the labor force are incented to spend less time in leisure and more time working while people outside the labor force are incented to join the labor force. As wages rise, the cost of spending time in leisure and the cost of not being a labor force participant rises.

Demand for labor curve

The amount of labor demanded by firms is generally assumed to be negatively related to the nominal wage; as wages increase, firms demand less labor. As with the supply of labor curve, this relationship is often depicted on a graph with wages represented on the vertical axis, and the quantity of labor demanded on the horizontal axis. The demand for labor curve is downward sloping, and is depicted as a line moving down and to the right on a graph.

A firm's cost is a function of the wage rate. As the wage rate rises, it becomes more expensive for firms to hire workers and so firms hire fewer workers.

Supply and demand for labour

Graph of Labor Market

Combining the demand and supply curves for labor allows us to examine the effect of a minimum wage. We will start by assuming that the supply and demand curves for labor will not change as a result of raising the minimum wage. This may be an incorrect assumption since jobs this low on the demand curve may be so integral to a business' function that they will not simply disappear because the business has to pay more to hire people for those positions.

The point at which the demand for labor curve and the supply of labor curve intersect is the labor market equilibrium. At the equilibrium, the number of people seeking jobs (the quantity supplied of labor) equals the number of jobs available (the quantity demanded of labor). If the wage rate rises above the equilibrium wage as shown in this chart, then the number of people seeking jobs would seem to exceed the number of jobs available. If the number of jobs is thus negatively affected, there would be fewer jobs available, and would theoretically lead to unemployment. Hence, in the absence of government intervention, competition among workers for the limited number of jobs would cause wages to fall until the wage rate reached the equilibrium. A minimum wage prevents wages from falling.

Standard theory criticism

Gary Fields, Professor of Labor Economics and Economics at Cornell University, argues that the standard "textbook model" for the minimum wage is "ambiguous", and that the standard theoretical arguments incorrectly measure only a one-sector market. Fields says a two-sector market, where "the self-employed, service workers, and farm workers are typically excluded from minimum-wage coverage… [and with] one sector with minimum-wage coverage and the other without it [and possible mobility between the two]," is the basis for better analysis. Through this model, Fields shows the typical theoretical argument to be ambiguous and says "the predictions derived from the textbook model definitely do not carry over to the two-sector case. Therefore, since a non-covered sector exists nearly everywhere, the predictions of the textbook model simply cannot be relied on. "[7]

An alternate view of the labor market has low-wage labor markets characterized as monopsonistic competition wherein buyers (employers) have significantly more market power than do sellers (workers). In Economics, a monopsony (from Ancient Greek μόνος (monos "single" + ὀψωνία (opsōnia "purchase" is a Market form In Economics, market power is the ability of a firm to alter the Market price of a good or service Such a case is a type of market failure and results in workers being paid less than their marginal value. Market failure is a concept within economic theory wherein the allocation of goods and services by a Free market is not efficient. Under the monopsonistic assumption, an appropriately set minimum wage could increase both wages and employment, with the optimal level being equal to the marginal productivity of labor. A wage is a compensation workers receive in exchange for their labor. Employment is a Contract between two parties, one being the employer and the other being the employee. The marginal revenue productivity theory of wages also referred to as the marginal revenue product of labor is the change in total revenue earned by a firm that results from employing one more unit [8] This view emphasizes the role of minimum wages as a market regulation policy akin to antitrust policies, as opposed to an illusory "free lunch" for low-wage workers. A regulated market, or controlled market, is the provision of goods or services that is regulated by a government appointed body rather than by Supply and demand. The phrase free lunch in U S literature from about 1870 to 1920 refers to a tradition once common in saloons in many places in the United States Detractors point out that no collusion between employers to keep wages low has ever been demonstrated, asserting that in most labor markets, demand meets supply, and it is only minimum wage laws and other market interference which cause the imbalance. Collusion is an agreement usually secretive which occurs between two or more persons to deceive mislead or defraud others of their legal rights or to obtain an objective forbidden Supply and demand is an Economic model describing effects on price and quantity in a Market. However collusion is not a pre-requisite for market power; segmented markets, information costs, imperfect mobility and the 'personal' element of labor markets all represent movements away from the idealized perfectly competitive labor market.

Debate

Support

Supporters of the minimum wage claim it has these effects:

  • Helps small businesses as well as big businesses. [9]
  • Increases the standard of living for the poorest and most vulnerable class in society and raises average. [10]
  • Motivates and encourages employee to work harder. (Contrast with welfare transfer payments. )[11]
  • Does not have budget consequence on government. "Neither taxes nor public sector borrowing requirements rise. " (Contrast with negative income taxes such as the EITC. The United States federal Earned Income Tax Credit (EITC or EIC is a Refundable tax credit. )[11]
  • Minimum wage is administratively simple; workers only need to report violations of wages less than minimum, minimizing a need for a large enforcement agency. [11]
  • Stimulates consumption, by putting more money in the hands of low-income people who spend their entire paychecks. [10]
  • Increases the work ethic of those who earn very little, as employers demand more return from the higher cost of hiring these employees. Work ethic is a set of values based on the moral virtues of hard work and diligence [10]
  • Decreases the cost of government social welfare programs by increasing incomes for the lowest-paid. [10]
  • Does not have a substantial effect on unemployment compared to most other economic factors [12], and so does not put any extra pressure on welfare systems.
  • Businesses' annual and average payrolls grow faster. [9]
  • Employment grows more quickly when minimum wage is increased. [9]
Opposition

Opponents of the minimum wage claim it has these effects:

  • Hurts small business more than large business. [13][14]
  • Lowers competitiveness[15]
  • Reduces quantity demanded of workers. This may manifest itself through a reduction in the number of hours worked by individuals, or through a reduction in the number of jobs. [16][17]
  • Reduces profit margins of business owners employing minimum wage workers, thus encouraging a move to businesses that do not employ low-skill workers. Profit margin, Net Margin, Net profit margin or Net Profit Ratio all refer to a measure of Profitability. [18]
  • Businesses try to compensate for the decrease in profit by simply raising the prices of the goods being sold thus causing inflation and increasing the costs of goods and services produced. In economics inflation or price inflation is a rise in the general level of prices of goods and services over a period of time [19][20]
  • Increases prices for customers of employers of minimum wage workers, which would pass through to the general price level,[21] which disproportionately affects the prices that poor people pay for goods and services. [22]
  • Does not improve the situation of those in poverty. Poverty (also called penury) is deprivation of common necessities that determine the quality of life including food clothing shelter and safe Drinking water, and "Will have only negative effects on the distribution of economic justice. Social justice, sometimes called civil justice, refers to the concept of a Society in which Justice is achieved in every aspect of society rather than Minimum-wage legislation, by its very nature, benefits some at the expense of the least experienced, least productive, and poorest workers. "[23]
  • Is a limit on the freedom of both employers and employees. Minimum wage laws make it illegal for employers to pay workers less than the minimum wage. This also prevents workers from being made to provide labor or services for less than the minimum. For example, during the apartheid era in South Africa, white trade unions lobbied for the introduction of minimum wage laws so as to exclude black workers from the labor market. By preventing black workers from selling their labor for less than white workers, the black workers were prevented from competing for jobs held by whites. [24]
  • Businesses spend less on training their employees. [22]
  • Is less effective than the Earned Income Tax Credit at targeting the truly needy, and is more damaging to businesses. The United States federal Earned Income Tax Credit (EITC or EIC is a Refundable tax credit. [22]
  • Reduces economic growth by skewing factor-choice incentives away from the optimum choice. Economic growth is the increase in the amount of the goods and services produced by an economy over time [25]
  • Increase in unemployment. Unemployment occurs when a person is available to work and currently seeking work but the person is without work. [26]
  • Decreases human capital by encouraging people to enter the job market instead of pursuing further education. Human capital refers to the stock of skills and knowledge embodied in the ability to perform labor so as to produce Economic value. [22]
  • Hurts the least employable by making them unemployable, in effect pricing them out of the market. [27]
  • Excludes low cost competitors from labour markets, hampers firms in reducing wage costs during trade downturns (etc. ), generates various industrial-economic inefficiencies as well as unemployment, poverty, and price rises, and generally dysfunctions as basically a special form of political-economic protectionism – the equivalent or analogue of such things as tariff barriers to low cost imports. [28]

Debate over consequences

Equivalence to a tax and subsidy

As argued by former Council of Economic Advisors Chairman Gregory Mankiw, a minimum wage is equivalent to:

  1. A wage subsidy for unskilled workers, paid for by
  2. A tax on employers who hire unskilled workers. The Council of Economic Advisers (CEA is a group of Economists who advise the President of the United States. Nicholas Gregory "Greg" Mankiw (mæŋˈkjuː (born February 3, 1958) is an American macroeconomist. [29]

The first part of the policy provides some benefit to low wage workers while the second part creates more unemployment among low wage workers. This is why the minimum wage is often criticized as a self-contradictory policy. Others argue the small decrease in employment is offset by the increased benefit to workers.

Empirical studies

Comparison of the minimum wage to unemployment among low skill workers in the U.S. The points in red are for the years 1998 through 2000. Unemployment for all workers in those three years was the lowest since 1970. Opponents of the minimum claim that these rises in unemployment are related to minimum wage increase.

A classical economics analysis of supply and demand implies that by mandating a price floor above the equilibrium wage, minimum wage laws should cause unemployment. Classical economics is widely regarded as the first modern school of economic thought. This is because a greater number of workers are willing to work at the higher wage while a smaller numbers of jobs will be available at the higher wage. Companies can be more selective in those whom they employ thus the least skilled and inexperienced will typically be excluded.

However, there are many other variables that can complicate the issue such as monopsony in the labour market, whereby the individual employer has some market power in determining wages paid. In Economics, a monopsony (from Ancient Greek μόνος (monos "single" + ὀψωνία (opsōnia "purchase" is a Market form Thus it is at least theoretically possible that the minimum wage may boost employment. Though single employer market power is unlikely to exist in most labour markets in the sense of the traditional 'company town,' asymmetric information, imperfect mobility, and the 'personal' element of the labour transaction give some degree of wage-setting power to most firms. A company town is a Town or City in which all Real estate, Buildings (both residential and commercial) Utilities

Economists disagree as to the measurable impact of minimum wages in the 'real world'. This disagreement usually takes the form of competing empirical tests of the elasticities of demand and supply in labor markets and the degree to which markets differ from the efficiency that models of perfect competition predict.

A 2000 survey by Dan Fuller and Doris Geide-Stevenson reports that of a sample of 308 American Economic Association economists, 45. The American Economic Association, or AEA, is the oldest and most important professional organization in the field of Economics. 6% fully agreed with the statement, "a minimum wage increases unemployment among young and unskilled workers", 27. 9% agreed with provisos, and 26. 5% disagreed. The authors of this study also reweighted data from a 1990 sample to show that at that time 62. 4% of academic economists agreed with the statement above, while 19. 5% agreed with provisos and 17. 5% disagreed. [32]

A similar survey in 2006 by Robert Whaples polled PhD members of the American Economic Association. The American Economic Association, or AEA, is the oldest and most important professional organization in the field of Economics. Whaples found that 37. 7% of respondants supported an increase in the minimum wage while 46. 8% wanted it completely eliminated. [33]

In the debate about minimum wage it is rarely mentioned by how much the quantity of labor demanded may fall if the minimum wage is raised. Research papers by the Employment Policies Institute[34] and by the National Center for Policy Analysis[35] claim that increases of 10% in the minimum wage may reduce demand hours worked at the minimum wage by around 1% or 2% depending on circumstances. The National Center for Policy Analysis ( NCPA) is an American non-profit conservative Think tank.

Some research suggests that the unemployment effects of small minimum wage increases are dominated by other factors. [5] In Florida, where voters approved an increase in 2004, a follow-up comprehensive study confirms a strong economy with increased employment above previous years in Florida and better than in the U. S. as a whole.  : “The Florida Minimum Wage After One Year. ” http://www.risep-fiu.org/reports/Florida_Minimum_Wage_Report.pdf

According to a claim by the Mackinac Center for Public Policy[36], the passage of the first Federal mandated minimum wage in the United States in 1938 led to an estimated 500,000 blacks losing their jobs via replacement by higher skilled and more educated white laborers. The Mackinac Center for Public Policy describes itself as a nonprofit free-market research and educational organization and is located in Midland Michigan in the Milton Friedman, 1976 Nobel Prize winner in Economics, called the minimum wage one of the most "anti-negro laws" for what he saw as its adverse effect on black employment. Milton Friedman (July 31 1912 November 16 2006 was an American Nobel Laureate Economist and Public intellectual. [37]

Today, the International Labour Organization (ILO)[2] and the OECD[12] do not consider that the minimum wage can be directly linked to unemployment in countries which have suffered job losses. The International Labour Organization Although strongly opposed by both the business community and the Conservative Party when introduced in 1999, the minimum wage introduced in the UK is no longer controversial and the Conservatives reversed their opposition in 2000. The Conservative Party (officially the Conservative and Unionist Party) is a Political party in the United Kingdom. [38] A review of its effects found no discernible impact on pay levels. [39]

Analysis Source Comparison Prop. Effects on Wage Prop Effects on Employment
New Jersey vs. Pennsylvania New Jersey MW Increased to $5. 05 April 1992 Fast Food Joints Across States 0. 11* 0. 04
Texas Fast Food Joints FED MW increased to $4. 25 April 1991 High- and Low-Wage Restaurants 0. 08* 0. 2*
California Teenagers California MW increase to $4. 25 July 1988 Teenagers in California 0. 1* 0. 12
Teenagers Across States Fed MW increase to $4. 25 1989 - 92 Cross States 0. 08* 0. 00
Low Wage Workers Across States FED MW increase to $4. 25 Across States 0. 07* 0. 02

MW - Minimum Wage FED - Federal

Card and Krueger

The laws of demand and supply predict that an increase in the minimum wage will reduce employment.

In 1992, the Minimum wage in New Jersey increased by 18% while the adjacent state of Pennsylvania remained at $4. 25. Card & Krueger gathered information on fast food restaurants that lay very close to the borders of Pennsylvania and New Jersey in an attempt to see what this effect had on employment within New Jersey. Classical economic would have concluded that relative employment should have decreased in New Jersey. Card and Krueger asked employers whether they intended to lay off workers in response to the increased minimum wage. Based on the employers' responses, the authors concluded that the increase in the minimum wage had no significant impact on employers' intentions to lay off employees.

The more common debate is on changes to minimum wages. This unified view was challenged by research done by David Card and Alan Krueger. David Edward Card is a Canadian labor Economist and Professor at the University of California Berkeley. Alan Bennett Krueger (born September 17, 1960) is a US Economist, Bendheim Professor of Economics and Public Affairs at Princeton University In their 1997 book Myth and Measurement: The New Economics of the Minimum Wage (ISBN 0-691-04823-1), they argued the negative employment effects of minimum wage laws to be minimal if not non-existent (at least for the United States). For example, they look at the 1992 increase in New Jersey's minimum wage, the 1988 rise in California's minimum wage, and the 1990-91 increases in the federal minimum wage. They assume that the demand for low-wage workers is inelastic. In Economics, elasticity is the ratio of the percent change in one variable to the percent change in another variable Noteworthy is that these results do not refute the theory underlying the prediction that a minimum wage reduces employment. Rather, the results suggest that the effect predicted by the theory may, in some instances, be small enough as to be statistically zero.

Critics, however, argue that their research was flawed. [40] For example, Card and Krueger gathered their data by telephoning employers in Pennsylvania and New Jersey, asking them whether they intended to increase, decrease, or make no change in their employment. Subsequent attempts to verify the claims requested payroll cards from employers to verify employment, and found that the minimum wage increases were followed by decreases in employment. On the other hand, an assessment of data collected and analyzed by David Neumark and William Wascher did not initially contradict the Card/Krueger results,[41] but in a later edited version they found that the same general sample set did increase unemployment. The 18. 8% wage hike resulted in "[statistically] insignificant—although almost always negative" employment effects. [42]

Another possible explanation for why the current minimum wage laws may not affect unemployment in the United States is that the minimum wage is set close to the equilibrium point for low and unskilled workers. Thus absent the minimum wage law unskilled workers would be paid approximately the same amount. However, an increase above this equilibrium point could likely bring about increased unemployment for the low and unskilled workers.

Reaction to Card and Krueger

Since the introduction of a national minimum wage in the UK in 1999, its effects on employment were subject to extensive research and observation by the Low Pay Commission. The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom, the UK or Britain,is a Sovereign state located The Low Pay Commission found that, rather than make employees redundant, employers have reduced their rate of hiring, reduced staff hours, increased prices, and have found ways to cause current workers to be more productive (especially service companies). [43] Neither trade unions nor employer organizations contest the minimum wage, although the latter had especially done so heavily until 1999.

Some leading economists such as Greg Mankiw and Paul Krugman, do not accept the Card/Krueger results,[44] while many leading economists accept the Card/Krueger results,[45][46] The Joint Economic Committee of the United States Congress has been critical of Card and Krueger's work. The Joint Economic Committee (JEC is one of four standing Joint committees of the U The United States Congress is the bicameral Legislature of the federal government of the United States of America, consisting of two houses They note that it conflicts with other studies done on minimum wage laws within the United States over the past 50 years. The United States of America —commonly referred to as the [47] According to the JEC, minimum wage laws have been shown to cause large amounts of unemployment, especially among low-income, unskilled, black, and teenaged populations, as well as cause a host of other mal-effects, such as higher turnover, less training, and fewer fringe benefits. Unemployment occurs when a person is available to work and currently seeking work but the person is without work. Poverty (also called penury) is deprivation of common necessities that determine the quality of life including food clothing shelter and safe Drinking water, and Demographics or demographic data refers to selected population characteristics as used in government Marketing or opinion research or the Demographic profiles See Turnover for other uses of the term Turnover, in a Human resources context refers to the characteristic of a given company or The term training refers to the acquisition of knowledge skills and competencies as a result of the teaching of vocational or practical skills and knowledge

According to economists Donald Deere (Texas A&M), Kevin Murphy (University of Chicago), and Finis Weltch (Texas A&M), Card and Krueger's conclusions are contradicted by "common sense and past research". Texas A&M University, often called A&M or TAMU, is a Coeducational public Research University located in College Station The University of Chicago is a Private university located principally in the Hyde Park neighborhood of Chicago.

They conclude that:[48]

“ Each of the four studies examines a different piece of the minimum wage/employment relationship. Three of them consider a single state, and two of them look at only a handful of firms in one industry. From these isolated findings Card and Krueger paint a big picture wherein increased minimum wages do not decrease, and may increase, employment. Our view is that there is something wrong with this picture. Artificial increases in the price of unskilled laborers inevitably lead to their reduced employment; the conventional wisdom remains intact. ”

Minimum wage alternatives

Some critics of the minimum wage argue that a negative income tax or earned income tax credit benefits a broader population of low wage earners, and society as a whole bears the cost. In Economics, a negative income tax (abbreviated NIT) is a Progressive income tax system where people earning below a certain amount receive supplemental The United States federal Earned Income Tax Credit (EITC or EIC is a Refundable tax credit. In this view, this is more economically efficient because a low tax rate on the broader economy causes less deadweight loss than a high tax rate on a small section of the economy. In Economics, a deadweight loss (also known as excess burden or allocative inefficiency) is a loss of economic efficiency that can occur when equilibrium The ability of the earned income tax credit to deliver a larger monetary benefit to poor workers at a lower cost to society was recently documented in a report by the Congressional Budget Office. The United States federal Earned Income Tax Credit (EITC or EIC is a Refundable tax credit. The Congressional Budget Office is a federal agency within the legislative branch of the United States government. [6]

Professor Kim Swales of the University of Strathclyde has, with others, submitted an alternative approach to the EC[49]. Kim Swales is a Professor of Economics at the University of Strathclyde. The University of Strathclyde (Oilthigh Srath Chluaidh is a university in Glasgow, Scotland. This provides incentives for a minimum wage without mandating it, by using tax breaks per employee to reduce the value added tax paid by employers. A tax break is a tax Saving. This includes Tax exemption, an exemption from all or certain Taxes of a state or nation in which part of Value added tax ( VAT) or goods and services tax ( GST) is a consumption Tax levied on value added. The report of the team's modelling states that this would not only increase employment levels but also increase GDP, i. e. it would reverse any unemployment and deadweight loss effects of a mandated minimum wage, acting as a Pigovian subsidy. In Economics, a deadweight loss (also known as excess burden or allocative inefficiency) is a loss of economic efficiency that can occur when equilibrium A Pigovian tax (also spelled Pigouvian tax) is a Tax levied to correct the negative externalities of a market activity

Lewis F. Abbott argues that employing companies are economic organizations, not charities or welfare agencies, and that national minimum wage fixing is a comparatively inefficient, costly, and dysfunctional method of raising the living standards of poorer households. The standard of living refers to the quality and quantity of goods and services available to people and the way these goods and services are distributed within a population It is much more practical and cost-effective for governments to seek to:

See also

References

  1. ^ a b American Academy of Political and Social Science. The following is a list of episodes for the FX reality series 30 Days. Garcia v San Antonio Metropolitan Transit Authority, 469 US 528 (1985 is a United States Supreme Court decision that holds that the Congress Guaranteed minimum income (GMI is a proposed system of Social welfare provision that guarantees that all Citizens or families have an income sufficient Labour economics seeks to understand the functioning of the Market and dynamics for labour. Labour law (also known as employment or labor law is the body of Laws administrative rulings and precedents which address the legal rights of and restrictions The list below gives the official Minimum wage rates in 197 countries 193 UN member states, the Republic of China ( Taiwan) Western Sahara, Under the Constitution of Canada, the responsibility for enacting and enforcing Labour laws including minimum wages in Canada rests with the ten provinces Living wage is a term used to describe the minimum hourly wage necessary for a person to achieve some specific standard of living A maximum wage, also often called a wage ceiling, is a State enforced limit on how much Income an individual can earn Nickel and Dimed On (Not Getting By in America is a book written by Barbara Ehrenreich. Scratch Beginnings is a book by Adam Shepard, a graduate of Merrimack College, about his attempt to live the American Dream. Some philosophers and political scientists make a distinction between negative and positive Rights, not to be confused with the similar but different distinction between Wage slavery is a term first coined by the Lowell Mill Girls in 1836 though articulated as a concept at least as early as Cicero and elaborated by subsequent thinkers "The Cost of Living. " Philadelphia, 1913.
  2. ^ a b ILO 2006: Minimum wages policy (PDF)
  3. ^ Leigh, Andrew (2005). "Does raising the minimum wage help the poor?". Discussion Paper No. 501. . Australian National University Centre for Economic Policy Research Retrieved on 2006-05-11. Year 2006 ( MMVI) was a Common year starting on Sunday of the Gregorian calendar. Events 330 - Byzantium is renamed ''Nova Roma'' during a dedication ceremony but is more popularly referred to as Constantinople
  4. ^ Leigh, Andrew (2005). "Does raising the minimum wage help the poor?". Discussion Paper No. 501. . Australian National University Centre for Economic Policy Research Retrieved on 2006-05-11. Year 2006 ( MMVI) was a Common year starting on Sunday of the Gregorian calendar. Events 330 - Byzantium is renamed ''Nova Roma'' during a dedication ceremony but is more popularly referred to as Constantinople
  5. ^ fairpay.gov.au - About the Commission. Australian Fair Pay Commission. Retrieved on 2007-07-05. Year 2007 ( MMVII) was a Common year starting on Monday of the Gregorian calendar in the 21st century. Events 1295 - Scotland and France form an alliance the beginnings of the Auld Alliance, against England.
  6. ^ Executive Summary July 2007 (PDF). Australian Fair Pay Commission. Retrieved on 2007-11-27. Year 2007 ( MMVII) was a Common year starting on Monday of the Gregorian calendar in the 21st century. Events 1095 - Pope Urban II declares the First Crusade at the Council of Clermont
  7. ^ Gary Fields (1994). "The Unemployment Effects of Minimum Wages". . International Journal of Manpower Retrieved on 2007-02-12. Year 2007 ( MMVII) was a Common year starting on Monday of the Gregorian calendar in the 21st century. Events 1429 - English Forces under Sir John Fastolf defend a supply convoy carrying rations to the army besieging Orleans from attack by the
  8. ^ Manning, Alan (2003). Monopsony in motion: Imperfect Competition in Labor Markets. Princeton, NJ: Princeton University Press. ISBN 0691113122.  
  9. ^ a b c Minimum Wage and Its Effects on Small Business
  10. ^ a b c d http://www.epi.org/content.cfm/issueguides_minwage Real Value of the Minimum Wage
  11. ^ a b c Richard B. Freeman (1994). "Minimum Wages – Again!". . International Journal of Manpower Retrieved on 2007-02-12. Year 2007 ( MMVII) was a Common year starting on Monday of the Gregorian calendar in the 21st century. Events 1429 - English Forces under Sir John Fastolf defend a supply convoy carrying rations to the army besieging Orleans from attack by the
  12. ^ a b OECD (2006): OECD Employment Outlook 2006 (read-only PDF)
  13. ^ Wal-Mart Warms to the State - Mises Institute
  14. ^ Eliminating Small Business
  15. ^ Wal-Mart's Perverse Strategy on the Minimum Wage
  16. ^ Tupy, Marian L. Minimum Interference, National Review Online, May 14, 2004
  17. ^ "The Wages of Politics", Wall Street Journal. Events 1264 - Battle of Lewes: Henry III of England is captured in France making Simon de Montfort the "MMIV" redirects here For the Modest Mouse album see " Baron von Bullshit Rides Again "  
  18. ^ Offshoring High-Tech and Professional Jobs
  19. ^ Increasing the Mandated Minimum Wage: Who Pays the Price?
  20. ^ Why Wal-Mart Matters - Mises Institute
  21. ^ Aaronson, D. and E. French, 2006. Output Prices and the Minimum Wage. Employment Policies Institute.
  22. ^ a b c d A blunt instrument, The Economist, October 26, 2006 (English)
  23. ^ (Cato)
  24. ^ Williams, Walter (1989). The Economist is an English-language weekly news and International affairs publication owned by The Economist Newspaper Ltd and edited in London Events 740 - An Earthquake strikes Constantinople, causing much damage and death Year 2006 ( MMVI) was a Common year starting on Sunday of the Gregorian calendar. South Africa's War Against Capitalism. New York: Praeger. ISBN 027593179X.  
  25. ^ Keiner, Morris; Kudrle, Robert (2000). "Does Regulation Affect Economic Outcomes? The Case of Dentistry". Journal of Law and Economics 43: 548-582. doi:10.2139/ssrn.202391. A digital object identifier ( DOI) is a permanent identifier given to an Electronic document.  
  26. ^ Wilson, Lilla. "How About a Real Minimum Wage Increase?", New York Times, 1989-11-17. Year 1989 ( MCMLXXXIX) was a Common year starting on Sunday (link displays 1989 Gregorian calendar) Events 284 - Diocletian is proclaimed emperor by his soldiers Retrieved on 2008-02-24. 2008 ( MMVIII) is the current year in accordance with the Gregorian calendar, a Leap year that started on Tuesday of the Common Events 303 - Galerius, Roman Emperor, publishes his edict that begins the persecution of Christians in his portion of the  
  27. ^ (Cato)
  28. ^ Lewis. F. Abbott, Statutory Minimum Wage Controls: A Critical Review of their Effects on Labour Markets, Employment, and Incomes. Industrial Systems Research Publications, Manchester UK, 2nd. edn. 2000. ISBN 978-0-906321-22-5. [1]
  29. ^ Greg Mankiw's Blog: Working at Cross Purposes
  30. ^ Statistical Abstract of the United States, Bureau of Labor Statistics [2]
  31. ^ U. S. Department of Labor, Employment Standards Administration [3]
  32. ^ Fuller, Dan; Geide-Stevenson, Doris (2003). "Consensus Among Economists: Revisited". Journal of Economic Review 34 (4): 369-387.  
  33. ^ Robert Whaples (2006) "Do Economists Agree on Anything? Yes!," The Economists' Voice: Vol. 3 : Iss. 9, Article 1.
  34. ^ "The Effect of Minimum Wage Increases on Retail and Small Business Employment", Employment Policies Institute, May 2006.  
  35. ^ "Minimum Wage Teen-age Job Killer", NATIONAL CENTER FOR POLICY ANALYSIS, May 20, 1999. Events 325 - The First Council of Nicaea &ndash the first Ecumenical Council of the Christian Church is held Year 1999 ( MCMXCIX) was a Common year starting on Friday (link will display full 1999 Gregorian calendar)  
  36. ^ "Great Myths of the Great Depression (page 10)", Mackinac Center for Public Policy, April 22, 2006. Events 1500 - Portuguese Navigator Pedro Álvares Cabral becomes the first European to sight Brazil. Year 2006 ( MMVI) was a Common year starting on Sunday of the Gregorian calendar.  
  37. ^ http://video.google.com/videoplay?docid=6813529239937418232&q=label%3Afree+market Milton Friedman Exposes The "Unholy Coalition" of Minimum Wage Supporters
  38. ^ National Minimum Wage. politics. co. uk. Retrieved on 2009-12-29. This article is about the year For the film see 2009 Lost Memories. Events 1170 - Thomas Becket: Thomas Becket Archbishop of Canterbury is assassinated inside Canterbury Cathedral by followers of King Henry II
  39. ^ Metcalf, David (April 2007). Why Has the British National Minimum Wage Had Little or No Impact on Employment?.
  40. ^ "Myth and Measurement: The New Economics of the Minimum Wage", Cato Institute, April 22, 2006. Events 1500 - Portuguese Navigator Pedro Álvares Cabral becomes the first European to sight Brazil. Year 2006 ( MMVI) was a Common year starting on Sunday of the Gregorian calendar.  
  41. ^ http://www.epinet.org/briefingpapers/minimumw_bp_1996.pdf
  42. ^ Neumark & Wascher, American Economic Review, Volume 90 No. 5.
  43. ^ Low Pay Commission (2005). National Minimum Wage - Low Pay Commission Report 2005
  44. ^ Greg Mankiw. Krugman on the Minimum Wage
  45. ^ Joseph Stiglitz. Employment, social justice and societal well-being, International Labour Review, 141 (1-2), p. 9 - 29.
  46. ^ Economic Policy Institute. Hundreds of Leading Economists Say: Raise the Minimum Wage
  47. ^ 50 Years of Research on the Minimum Wage
  48. ^ Sense and Nonsense on the Minimum Wage
  49. ^ Swales, J. K. ; D. R. Holden, and G. Beacon (1995). The employment effects of subsidies. Report to the Directorate of General Employment, Industrial Relations, and Social Affairs. Commission of the European Communities..
  50. ^ Lewis. F. Abbott, Statutory Minimum Wage Controls: A Critical Review of their Effects on Labour Markets, Employment, and Incomes. Industrial Systems Research Publications, Manchester UK, 2nd. edn. 2000. Chapter 7: "The Effects of Minimum Wage Controls on Incomes and Welfare". ISBN 978-0-906321-22-5. [4]

External links

Dollars & Sense is a Magazine dedicated to providing Left-wing perspectives on Economics.

Dictionary

minimum wage

-noun

  1. The lowest rate at which an employer can legally pay an employee; usually expressed as pay per hour.
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