Wages, typically known as salary, play a great role of significance in the lives of employees employers, and economies around the globe. Within different economies, it can be easily seen that even the workers who get the lowest salary have a fixed salary that cannot be reduced than that this ...
Wages, typically known as salary, play a great role of significance in the lives of employees employers, and economies around the globe. Within different economies, it can be easily seen that even the workers who get the lowest salary have a fixed salary that cannot be reduced than that this can be simplified in two words- minimum wage. The concept of minimum wage is quite simple as it describes the lowest wage any company or employer can give to any type of employee. The USA follows a national minimum wage of $7.25 per hour. It was $0.25 per hour when started by FLSA in the year 1938 under President Franklin D. Roosevelt. Apart from USA united kingdom started the minimum wage low in 1909 Davis-Bacon act in the united states became an issue as it basically stood for discrimination between white and black workers moving further minimum wage has certain pros and cons it leads to better employee satisfaction moreover it may help in the reduction of poverty, on the other hand, it can cause job loss to many employees in this way minimum wage impacts employment as well as inflation let us go through its impact on employment and inflation respectively.
The minimum wage is one of the leading factors that affect employment through different aspects. These effects can be either negative or positive and normal or abnormal. However, they somehow affect the economies and lives of those related to them. To cite an example, had national legislation for minimum wages in 1999. The main purpose was to increase the minimum wages for all types of workers. Many studies found that the best thing was that everything was almost positive. Almost every worker in the labor market was happy with the legislation as it provided them with a better standard of living. This is because the act provided workers with equal wages. So, the belief in inequality started disappearing. The workers, especially the low-income workers, saw themselves living with better social facilities. Even though the majority of workers were happy, part-time workers faced certain negative effects and lost their jobs. Another major topic in this series is regarding formal and informal sector workers. The formal sector refers to the major sector that stands for the rest of the works. When the minimum wage is increased for the formal sector, it can lead to a major reduction in poverty. This can especially help low-income homes where only one person earns for the whole family. This would give the whole family a better standard and facilities for their lives. This all can be done by increasing the rate of minimum wages. Moving to the next side of the coin, if the act of increasing the minimum wage fails to cover each and every part for implementation, it can lead to failure and may have a negative effect. In Addition to this, with higher minimum wages, employers may try to reduce the strength of workers leading to a great rate of loss of jobs.
Furthermore, another thing we have to discuss with regard to minimum wages which is inflation. The first thing to note is that with raised minimum wages, the prices of goods, as well as services, would also get raised eventually. In addition to prices, there is a great difference between the effects of large raises in the minimum wages and small or minor raises in the minimum wages. Large raise basically results in an increase in the rate of inflation. Whereas, small raise may even reduce inflation on a small scale, as per some studies. There is a report prepared by researchers MacDonald and Nilsson which states that the food prices in restaurants from the year 1978 to 2015 had very little raise in their prices. The rise was just 0.36% and that for every 10% increase in the minimum wages of the employees. In the USA, the time around the 1940s to 1960s saw a period where the minimum wages increased as well as the productivity in the economy and the rate of inflation as well. In 1968, minimum wages stopped increasing though. So, the purchasing power of the minimum wage has kept declining since 1968. In 2009, it was $8.70 which is 17% less than that in 1968. Moreover, today it is 31% less than in 1968 with its rate at $7.25. It was $10.54 in 1968. There is another report from the Congressional Budget Office (CBO) which basically states that if we go with the minimum wage at $15 per hour, there is an estimation of around 1.4 million loss of jobs by the year 2025. This report was criticized by Mr. Arindrajit Dube from Massachusetts University. He stated that CBO has taken the number of job losses to a great extent. The rate of job loss would be just 5 lakhs or less than that. This has been supported by Dr. Daniel Kuehn, who is a researcher at The Urban Institute. As per him, minimum wages, if raised, may affect prices but that would be like nothing. Therefore, there are always debates regarding that. Does this also raise a major question would only raising the minimum wage to increase help workers survive in inflation? Simply because if minimum wages increase with inflation side by side, money would grow with the same purchasing power. On the other hand, if it grows with productivity in developing economies, the workers surviving on minimum wages have a chance to get better over time.
To conclude, minimum wages are closely associated with employment and inflation too. There are certain facts, theories, studies, and figures to make clear our minds regarding the rate of minimum wages in different countries and economies. There are a few pros and cons with regard to that. In the last, it makes us think broadly and makes me reach the fact that if thing is within the limit, it is all good. At the perfect rate, we can make out much more benefits and fewer disadvantages from minimum wages, and that too with keeping employment and inflation level in mind.
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