The fixation of wages bind the company to pay the workers the minimum amount as the government has fixed. Such situations might contribute in increasing the costs of employers thus causing them to make adjustments otherwise. For instance, the employers can choose to adjust this cost by reducing the hiring of workers, reducing the working hours, minimising the benefits and allowances and charging higher prices in return to compensate the cost incurred. A number of policy makers are on the view that companies cope with the fixation of minimum wages and increase in the minimum wages by compromising on the profits but in most of the situations, this is not the case. In order to maintain their net earnings, the business look for a number of alternatives, that includes cutting employment and making other similar decisions.
Namely, the concern is that jobs will be taken from US citizens and given to non-citizen immigrants. Resulting from this shift would be lower tax revenues, decreased consumer spending, lower wages for US citizens, and a multitude of other ripple effects. Though incorrect, when taken at face value this argument appears to hold water. Traditionally, the assumption is that immigrants are coming to the US from underdeveloped or third-world countries in the aims of improving their current living situation. Therefore, these immigrants who were making pennies on the dollar compared to their US counterparts would be willing to work for wages that are higher than in their home country but lower than what US citizens are paid.
The most commonly used method is the Gini coefficient, which can help to compare the level on inequality between countries. In order to reduce the inequality in the country, the government try to found some solutions. In the United States, an increase in minimum wage is one of the solutions to reduce the gap between rich and poor. Another issue is to tax more the wealthiest in the United States, this could help the poorest
. To ensure price stability is maintained the Reserve Bank adjust the OCR which influences prices in the economy. Price stability, which is when the purchasing power of money stays constant, is a desirable outcome of the government because inflation has several negative impacts on household and firms. Inflation erodes the values of households’ savings and causes those on a fixed income to lose purchasing power, the quantity of goods a set amount of money will buy. For firms, inflation causes cost or production to income since workers’ demand pay rises, as well as making it difficult to firms to plan for future.
Also, because the minimum wage levels are different from one state to another, some states have higher minimum wage, some economists believe that this would have negative impacts on investments, as investors would like to invest their money in states with lower minimum wage to minimize the cost and to maximize the profit. In addition to some currently existed industries which would tend to shift their investments to other states with lower minimum
With this data, the holding cost and the ordering cost was determined in order to compare the cost estimates from their current method and the recommended method. This portion of the project was the most challenging to complete because there was some reverse engineering involved to get the total cost for each product. This data is shown in Appendix J. Before going in calculating the EOQ some assumptions needed to be established;
According to them, the lower cost of production will eventually lead to a decrease in the price of the product, thus the increased demand derived from this will result in higher profit that could be invested in employee benefits. However, a study by McKinsey found that two thirds of those economic benefits spill back to the United States (Schroedder and Aepeal, 2003) Besides, offshoring can create jobs in a developing country, building a strong economic base, increase domestic consumption and encourage imports from developed countries such as the USA. Moreover, offshoring helps companies concentrate on their core business area and skilled manpower at an affordable price. Countries like India benefit from this kind of outsourcing creating employment for highly qualified personnel, making it the center of software development services industry. However, there are also negative views on offshoring.
This cost will then be absorbed by firms or more likely be passed on to consumers in the form of higher prices. This is an example of cost-push inflation. Such inflation erodes income gains associated with minimum wages, while causing aggregate demand levels in the economy to decline (DPRU, 2008). Effect on relative poverty Minimum wage has a limited effect in reducing poverty as those in the poorest sections of society, who tend to be those receiving Jobseeker’s Allowance and incapacity benefits, do not benefit from it. Shadow labour markets may
It is not always as good for the economy, as we think it is, because it creates surpluses, wasteful increases in quality, lost gains from trade and misallocation of resources. Minimum wage is one of the examples of a price floor. It is the lowest wage an employer may pay an employee and it is determined by law or contract. Increasing the minimum wage might seem like a great idea. However, it comes with many disadvantages.