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.
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
The possible downside is as well believed to be that a minimum wage that is higher may discourage possible employers from adopting the services of the “low wage low skilled workers” who are to be assisted by the minimum wages. If the minimum wages are found to be reducing the employment of the workers with low skills, then they are not a “free lunch” as perceived and better wages will help the crime rate be at a
Still, I want to summarize some potential future developments in the following section. One possible long-term implication that employment protection and pay will be reduced for both, women and men, due to the severity and length of the recession and the austerity period. This would result in more flexible and less regulated labor markets and a downward convergence in the employment conditions for both genders – which can already be seen in the lower pay for men and the higher share of male part-time workers. Other implications could be a downgrading of status and pay of public sector employees, and a decrease of high quality social services to replace and support women’s domestic labor (Karamessini & Rubery,
A minimum wage is considered as the lowest compensation that employers may legally pay to employees. Similarly, employees may not sell their labor below the price floor. A price floor is a legal minimum in which the government does not facilitate the price of a good or service to decrease below the floor. The minimum wage has gained impetus among policy makers as a method to lessen rising wage as well as inequality of income. However, higher minimum wage or increasing price floor on the price of labor leads to job loss and probable magnitude of those losses.
That is the heart of the liberal perspective on increasing the minimum wage and paying employees more will not just help workers but business owners and the population at large. This is so for several reasons. First, paying workers a higher salary is going to increase the productivity of the workers. This increased productivity and improved customer service will generate more in revenue than the increase in wages. Secondly, the reduction
(Besanko, David, Dranove, & Shanley, 2000) 2.2. Effect of minimum wage on equality from theoretical perspective: Minimum wage legislation is good for those employees who remain employed after the legislation as they are now getting higher wages as compared to before. (Mankiw, 2008) But it is bad for those employees who get laid off (i.e. become unemployed) because the employers now find it expensive to hire them due to the minimum wage legislation. (Besanko, David, Dranove, & Shanley, 2000) Thus, minimum wage leads to a rise in inequality.
The country wants low rate of unemployment because high unemployment brings some costs in an economy. Firstly, those who are unemployed will not receive any wages, means they face money crisis. Secondly, it can lead to government costs; increase in unemployment means that they need to give unemployed people for some social welfare. On the other hand, tax revenue will decrease because there are less tax payers. The unemployment also causes to increase crime rate, homeless people and poverty.
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
Classical or real-wage unemployment occurs when real wages for a job are set above the market-clearing level, causing the number of job-seekers to exceed the number of vacancies. Many economists have argued that unemployment increases with increased governmental regulation. For example, minimum wage laws raise the cost of some low-skill laborers above market equilibrium, resulting in increased unemployment as people who wish to work at the going rate cannot (as the new and higher enforced wage is now greater than the value of their labor). Laws restricting layoffs may make businesses less likely to hire in the first place, as hiring becomes more risky. However, this argument overly simplifies the relationship between wage rates and unemployment,
Numerous studies have shown that employment increases from the state and federal level had an overall positive effect on employment (Whitaker et al. 631). Higher wages attract more employees and reduces turnover, which results in company’s saving money. In addition to assisting employees to live above the poverty line, a minimum wage increase would benefit owners. A higher minimum wage would benefit people across the board, it should stop being politicized so
The expansion will occur due to the change in the workers income caused by the federal minimum wage rise. When the income will grow the amount of spendings will grow as well. As the result, businesses’ profits will go up which will give them an opportunity to provide more workplaces.Thus people who seek jobs will be given a chance to find one. However, it would perfectly work this way only for a big businesses with higher profits level while small businesses will not feel the benefits that much. However, big businesses may collaborate with small businesses since they are able to produce and earn more than they did before.
The minimum wage is a large-scale reason of poverty. The federal minimum wage should be increased because raising it would increase the economic activity and spur job growth, decrease poverty, and also improvements in productivity and economic growth have outpaced increases in the minimum wage. Increases in job growth and economic activity will happen when the minimum wage is elevated. If the minimum wage was increased it will “inject 22.1 billion net into the economy and create about 85,000 new jobs over a three year period”. (“Raising the Federal minimum Wage to $10.10 Would Lift Wages for Millions and Provide a Modest Economic Boost") Thousands of new jobs will be created and it will put billions of dollars into the economy.
Although there are many ways to look at minimum wage, such as the increase and decreases, and how it will affects today 's economy it has both negative and positive effects. I believe that the minimum wage has an overall negative impact because whenever the minimum wage is increased it only makes more people recede into poverty when it is supposed to do the reverse effect. Minimum wage was originally made for people just starting out or a pay for low-skilled employees. I believe that if people can 't afford the stuff they need because of a minimum wage, then they should work harder to either get a pay raise or move to a higher paying job. This would not only help our economy grow but help people out of debt and poverty.
The effect of the recession on HBCUs As we know a recession is defined as a temporary decline in income due to reduced trade and production activity. Everything in society is ran by a sort of system. For example, in order for a company to thrive it must have two things, workers and production. If there are not any workers, than there is little to no production unless the company is ran by machines. If there is not any production than the chances of workers being laid off increase based on how many people are needed for certain jobs through out the company.