Positive effects on minimum wages Essay

Introduction

A minimum wage is defined as the lowest monthly, daily are even hourly wage which an employer may legally pay his workers or employees. There are laws in different countries which regulate the minimum wages so as to avoid the social injustices as well as help reduce the workers exploitation and also ensure that the workers can afford their basic necessities.

In the labor markets however the workers supply their labor which is then sold for their wages and the employers on the other hand demand for their employee’s labor. The minimum wages are predicted so as to result in more people be unwilling to offer their labor for hire whereas there are fewer employers who are willing to hire the labor which results to a surplus of labor. (Ehrenberg 1994)

Positive effects on minimum wage on:

The employees
To start with a minimum wage increases the employment opportunities amongst the unskilled and the young workers. The minimum wages on the other hand increases the average living standards of the employees especially on those employees who are from very low socio-economic status. (Ehrenberg 1994)

The employees are however given the task of reporting to the necessary authorities if their wages are less than the minimum and this however minimizes the need for an agency for enforcement of the wages legal laws. (Ehrenberg 1994)

On the other hand the minimum wages have positive effects on the employees since it further stimulates their consumption by placing more money in their custody majority of who are the low income earners who spend their entire paychecks by meeting their basic needs.

The earnings of the minimum wage workers are very essential especially to their families’ total income. Even though not all the minimum low wage workers are the sole bread winners in their families or are even poor the income of the low wage workers is very important especially in their economic wellbeing.

The minimum wages also protects the low skilled workers effectively and it also guarantees them minimum earnings which they would not get if they were not employed at all and even some of these employees would even result to crime if they lacked this minimal wages. (Sanjiv 2003)

The government
The minimum wage does not have the budget consequence on the government’s budget and also neither the taxes nor even the public sector borrowing requirements escalate in comparison with the negative income taxes. Another positive effect that the minimum wage has on the government is that it decreases the government’s costs of the social welfare and also other social welfare programs by increasing the incomes for those who are paid the lowest in various companies.

The minimum wages also prevent the in work benefits for instance the earned income tax credit and also the working tax credit from further causing a reduction in the employees’ gross wages which would otherwise occur if the supply of labor was not perfectly set. The minimum wages on the other hand alleviate poverty on the low income earners and they can at least afford the basic necessities of life such as food clothing and shelter which will further enable them to have a decent life.

The minimum wages give the poor individuals an opportunity to further improve on their economic situation and it also helps to lift them out of extreme poverty. It also helps the low income earners maximize their opportunities

The company.
The minimum wage in companies creates an incentive for the employees to work harder and also more efficiently. This is in contrast with the welfare transfer payments. It is also very simple to administer the minimum wage in various business settings and the employees only have the obligation of reporting the wages violations. (Sanjiv 2003)

The minimum wage has positive effects on the companies such that it increases the employee’s work ethics especially for those who earn very little wages since the employers demand more return from the higher cost which they incur in hiring these employees.

The minimum similarly decreases the opportunities for the low skilled workers in gaining more responsibility and also training and this becomes an advantage to various companies since they retain these workers for a very long time in their companies. This reduces the company’s expenses in doing more recruitment for new employees and also the training casts for the new employees are also reduced. (Sanjiv 2003)

The inability of the employees in lacking more skills and training in their working places allows them to have very few job opportunities which would open for them in this also makes them to be retained for a longer period of time by the companies and this is a positive effect on the company itself in terms of costs and also workforce.

 

 

Table 3. Minimum wages as % of average gross wages, 1995-2004

Country
Minimum wage as % of average gross wage
Change in percentage points

1995
1998
2001
2002
2003
2004
1995/8
1998/2001
2001/4

Belgium
52
49*
na
46
na
na
-3**
-3***
na

Bulgaria
34
28
36
39
40
40
-6
+8
+4

Czech Republic
27
23
34
36
37
37
-4
+11
+3

Cyprus
na
na
na
na.
na
41
na
na
na

France
47-48
49
47-48
46-47
46-48
na
+1-2
-1-2
+0-1

Greece
na
na
na
na
na
47
na
na
na

Hungary
31
29
39
41
36
36
-2
+10
-3

Ireland


51
49
na
51


0

Estonia
26
27
29
30
32
34
+1
+2
+5

Latvia
31
32
38
35
37
38
+1
+6
0

Lithuania
28
45
44
43
41
38
+17
-1
-6

Malta
52
49
43
44
44
44
-3
-6
+1

Netherlands
48
46
45
45
na
na
-2
-1
na

Poland
41
40
37
35
36
36
-1
-3
-1

Romania
39
42
32
32
27
29
+3
-10
-3

Slovakia
34
30
40
41
42
41
-4
+10
+1

Slovenia
41
40
41
42
42
44
-1
+1
+3

Spain
42
na
35****
na
na
33
na
na
na

UK


37
38
39
40


+2

·         Figure refers to 1999; ** figure refers to 1995/9; *** figure refers to 1999/2002; **** figure refers to 2000.

Source; European industrial relations observatory online (2005): Minimum wages in Europe. Retrieved from http://www.eurofound.europa.eu/eiro/index.htm   Accessed on 24th October 2007.

The companies also benefit from the minimum wage since they get more people who are willing to work for the minimum wages and enter the job markets instead of pursuing the higher education. The companies therefore never lack people who are willing to be recruited to work for minimum wages. (Sanjiv 2003)

On the other hand most of the businesses spend very little money on training their employees since the employees do not require very high and technical training which d very costly.

Thus most businesses save on their training costs in terms of training their workforce. On the other hand the profit margin of various companies also increases to the business owners since they are able to employ very many workers at very minimal wages who can perform their work effectively. . (Waltman 2000)

In the low wage labor markets there is generally a job growth in the companies and there is also a great deal of turnover and the changing of jobs. The minimum wage workers on the other hand are not likely to actually be laid off as a result of the increase but on the other hand the employers would rather adjust by not replacing the workers who vacate their working position.

The minimum wages also create a fixed demand for the employment opportunities and the companies would further face a decline in employment if the wages are increased. For example most companies can afford such occupations such as an elevator operator, a messenger since the company can be able to maintain them by giving them the minimum wages.

The minimum wages similarly increases more employment opportunities in the retail and the small businesses sectors. . (Waltman 2000)

The minimum wages also ensures that the employee’s wages are at least guaranteed at any given time as long as the employees retain their positions in the same companies which they work for.

Conclusion

The minimum wages however set the floor for the value of the work and it also lifts the living standards of the minimum wage earners. The minimum wage is also a method through which wealth is distributed and redistributed in the society just like the minimum wage. (Fuller and Doris 2003)

The minimum wages further makes the employees become very innovative than the highly skilled workers who have maximum wages and who pursue demanding jobs. The creativity and the innovativeness of the minimum wage earners causes them to start their own businesses and companies through their creative ideas and they are also able to employ other people as they become self employed.

The minimum wages further causes the governments to reduce printing its money since money is a commodity whose value is subject demand and supply. Similarly with the minimum wages most of the employing companies have a wider selection from which to choose from and select the employees who are at least skilled and also those who have little or no experience. (Waltman 2000)

The minimum wage earners do not have the power to bargain for their pay increment since they are least skilled and also very inexperienced and they also are at the mercies of the employers. This motivates them to even work harder sop that the employers can at least appreciate the quality of their work and eventually increase their minimum wages.

 

Reference:

Waltman, J. (2000): The Politics of the Minimum Wage. University of Illinois Press publishers

Sanjiv, S. (2003): Raising the rate; an evaluation of the up rating mechanism for the minimum wage. Employee Relations Cambridge University Press

Ehrenberg, G. (1994): Labor Markets and Integrating National Economies. Brookings Institution Press, p. 41

Fuller, D. and Doris G. (2003): Consensus among Economists. Revisited, in: Journal of Economic Review, Vol. 34, No. 4

European industrial relations observatory online. (2005): Minimum wages in Europe. Retrieved from http://www.eurofound.europa.eu/eiro/index.htm

Accessed on 24th October 2007.