Minimum Wage Legislation

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This paper will discuss the meaning and impact of minimum wage legislation on earnings and employment. It will give theoretical explanation on how the fixing of minimum wage will affect the workers in the labour market, especially the low wage workers. It will explain how the labour market will react with an increase in the minimum wage legislation.

INTRODUCTION The concept of minimum wage is an age-long economic issue that has been repeated over periods and economic cycles. Minimum wage however has been the subject of economic discourse over the years in different countries even before the international Labour Organization (ILO) was created ( Hyginus
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A subsequent law was enacted by Australia, in 1896 established wage boards on which the workers and employers were represented in equal number, with the power to fix minimum wage enforceable on the employer. In 2004, China issued new regulation on minimum wage to solve the problem of wage inequality. In Brazil and Argentina it has been revitalized to help reverse the decline in wage of low paid workers since the early 2000s (ILO: Global Wage Report 2008/09 Geneva, 2008). In countries without a fixed rhythm of adjustment, for example in Russia, Nigeria, Cambodia and Malaysia, minimum wage increases in arbitrary way according to specific economic, social and political conditions in the country. Fapohonda et al (2012) describe minimum wage not only as the smallest hourly wage that an employee is paid as mandated by federal law but also as a social protection which requires the effort, commitment and collaboration of all stakeholders. This corresponds to ILO Convention 131 of 1970, which stipulates: that minimum wage must minimum sum payable to a worker for work performed or services rendered within a given period, whether calculated on basis of time or output, which may not be reduced either by individual or collective agreement, which is guaranteed by law and which may be fixed in such a way as to cover the minimum need of the worker and his/her family in…show more content…
The minimum wage is set at Wm and if the minimum wage is set at that point, at point A demand for labour drops at E1 and supply of labour (point B) increases to E2.

IMPACT OF MINIMUM WAGE ON EMPLOYMENT As it was stated above the basic competitive model is what is used to set the minimum wage. Therefore using the basic competitive model the effect of minimum wage legislation will be observed (positive or negative effect). The graph below is going to explain in detail; the effects of minimum wage on employment wages D S WM C D

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