Minimum wage Free Essays

Minimum wage in Naples Labor Market Minimum wage Is the price floor imposed by the government for the welfare of labor. Price floor Is the legal minimum on the price at which a good can be sold. It Is an attempt by the government to maintain prices at other than equilibrium levels. We will write a custom essay sample on Minimum wage or any similar topic only for you Order Now When a government Imposes a price floor, there will be two cases. One the price floor Is not binding if the price floor is maintained below equilibrium price level. In this case, the market forces naturally move the economy to the equilibrium level and the price floor as no effect. In other case when price floor is above equilibrium level, such price floor is binding. In this case the market price equals price floor as government imposes such control on prices for the welfare of labors. At this point the quantity supplied exceeds the quantity demanded which results in surplus of labor I. E. Unemployment. Since the supply is high some seller are unable to sell all they want at the market price. The sellers who appeals to personal biases of the buyer, perhaps due to racial or family ties, are better able to sell their goods than those who do not. By contrast, In a free market, the price serves as the rotational mechanism, and sellers can sell all they want at the equilibrium price. The Impact of minimum wage rate depends on the skill and experience of workers. Highly experienced and skilled workers are not affected because their equilibrium wages are above the minimum wages. Thus, the minimum wage raises the income of workers who have jobs but lowers the income of workers who cannot find Jobs. A labor market with a binding minimum wage: Minimum wage in context of Nepal: Minimum wages dictate the lowest price for labor that any employer may pay. Wages of workers are considered a principal cause of Industrial disputes in Nepal. The prevalence of a low wage rate has aggravated the extent of economic exploitation of employees. An assessment has reflected that employers themselves are retelling a greater part of profits and benefits and only a small part to others sectors Including social securities and labor welfare activities. Wages and benefits are not compatible with increasing productivity and overall economic development of the country. So, to ensure workers a minimally adequate standard of living, the Minimum Wage Determination Committee has set the minimum wage rate for formal sector accordingly. Naples labor market is subjected to the forces of supply and demand. Workers determine the supply of labor, and firms determine the demand. If the government does not intervene, the wages normally adjust to balance labor supply and labor demand. If government fixes the minimum wage rate above the market equilibrium level, the quantity of labor supplied exceeds the quantity demanded. The result Is unemployment. In Nepal the minimum wage was RSI. 200 In 2011 which Is not relevant due to the fast changing socio-economic realties. This Is the reason trade unions negotiating on behalf of employees are demanding that Mullen wages should be doubled to RSI. 12400. They have an argument that prices of particularly in Katmandu, an expensive city, even a monthly wage of RSI. 12400 for is far from enough for comfortable life. Some others have been asking for RSI. 15000 minimum salary claiming that it is insuffic ient to survive in towns and its suburbs with the present salary and wage structure. So, let’s see the consumer price index (ICP) of Nepal to find whether the wage rate is determined on the basis of ICP. Annual National Consumer Price Index Base: 2005/2006=100 Highest minimum wage in South Asia: The minimum wage in Nepal as agreed by the employers and trade unionists in May 2013 is the highest in South Asia. Though Napalm’s minimum wage was highest in Pradesh in India raised theirs above Napalm’s. The average minimum monthly salary of India at US $47 still was lower than that of Nepal. Entrepreneurs believe that the problem of scarcity of workers in Nepal will decrease after the salary hike. According to Upstairs Murray, Vice President of the Federation of Naples Chambers of Commerce and Industry (FINCH), the flight of workforce will be stopped as the daily wage has been increased along with the minimum monthly salary. Entrepreneurs have also claimed that the Indian workers can be attracted as the minimum daily wage has been increased from RSI. 230 to RSI. 318. Minimum Monthly Salary in Year Country In US $ Nepal Sir Lankan Bangladesh Pakistan 70 Attar Pradesh (India) Briar (India) Conclusion: The government has declared the minimum wage but it is difficult to implement because of anti-worker and anti-union mentality . N the part of the government, here is no system of implementation and mechanism for monitoring the progress. From the very beginning, disputes have emerged with respect to the implementation of the wages particularly in the formal sector. Wage issues have now become the most important agenda in the industrial relations in the country. If the government and employers do not take this matter seriously and if they fail to implement corrective measures, the workers will go frustrated resulting in industrial unrests and other adverse effects in productivity. Over time and again minimum wage has increased. For long, the minimum wages earned by workers fell far below the amount needed to satisfy the family subsistence. But after unionization of labor, positive developments occurred in terms of real wages. However, only the fixation of wages cannot maintain healthy industrial relations. Regular monitoring of the implementation of the wages is very important. In the case of Nepal, this aspect is fully absent. Workers in enterprises or sectors where union is absent or weak are still compelled to work for a wage that is insufficient to earn a living. It is recommended that the minimum wage is fixed for workers taking into consideration the existing inflation rate. Employers have been asking for a scientific method for salary and wage hike based on annual inflation rate published by the central bank that will end to fear every two years that employees might go on strike. The government’s move to automatically revise minimum salary and wage every two years from the beginning of the new fiscal year will give political parties little room for bickering in the industrial sector and disturb the business environment. How to cite Minimum wage, Papers Minimum Wage Free Essays The concept of minimum wage is to ensure that employers do not pay wages below the mandated level. However this does not always happen instead this policy ends up hurting these workers and the economy in terms of lower job opportunities. This is because the increase of labor costs keeping all other things constant would eat into the net profits of the company. We will write a custom essay sample on Minimum Wage or any similar topic only for you Order Now Therefore in order to offset the decrease in profits, the need for low skilled labor decreases and companies look for higher productivity workers. The groups that are directly affected by the minimum wage consists of young workers or teenagers, part-time workers and workers from non-poor families. According to the Bureau of Labor Statistics, 1. 8 million paid-hourly employees were paid the federal minimum wage of $7. 25 in 2010. 5 These 1. 8 million employees can be broken down into two broad groups: Roughly half (49. 0 percent) are teenagers or young adults aged 24 or under. A large majority (62. 2 percent) of this group live in families with incomes two or more times the official poverty level. Looking just at the families of teenaged minimum wage workers, the average income is almost $70,600, and only 16. 8 percent are below the poverty line. 7 Note that the federal minimum wage applies to workers of all ages. 8 The other half (51. 0 percent) are aged 25 and up. 9 More of these workers live in poor families (29. 2 percent) or near the poverty level (46. 2 percent had family incomes less than 1. 5 times the poverty level). 10 However, even within this half of all minimum wage employees, 24. percent voluntarily work part-time, and just 34. 3 percent are full-time full-year employees. 11 Only 20. 8 percent of all minimum wage workers are family heads or spouses working full time, 30. 8 percent were children, and 32. 2 percent are young Americans enrolled in school. 12 The popular belief that minimum wage workers are poor adults (25 years old or older), working full time and trying to raise a family is largely untrue. Just 4. 7 percent match that description. 3 Indeed, many minimum wage workers live in families with incomes well above the poverty level. In order to understand the effect of raising minimum wage, the competitive model for economy can be used. This model requires a negative sloping demand curve for labor and wage rate that is competitive in nature. This means that the wage rate is not determined by any individual agents and is always equal to the market rate. In the figure shown below the dema nd curve is labeled as DD and the supply curve is SS. As mentioned, since the market decides the wage rate , the intersection of the demand and supply gives this rate – Wc. The corresponding employment rate is Ec. By imposing the minimum wage Wm, another corresponding employment rate emerges Em. With the implementation and increase of minimum wage, the demand of employment reduces and also has a corresponding excess supply for labor. However with the increase in minimum wage there is also an influx of new labor attracted by the minimum wage which puts further pressure of the employment opportunities available. However this comes at the expense of low skilled labor who find it very difficult to compete in the new scenario. The effects of raising minimum wage could be channeled in the following ways: * Decreased employment opportunities to keep profit margins * The increased cost of labor may be passed on the to the consumer in terms of higher prices for products and services. * Firms may decide to reduce the working hours and maintain the existing labor force which diminishes productivity of the firms. Reduced job training which diminishes the firms to maintain high productivity among the labor force. However if the model is assumed to be the monopsony model, the economy is considered to be marginally competitive. This means that majority of the market share is under a few firms. In this scenario, if the minimum wage is increased from below competitive wages to competitive wages as shown in the diagram, the employment rates will actually increase. This is because there is a new found interest in the labor force to work in these industries and the companies can afford to pay these wages. However this concept is not widely used due to low presence of lower- wage firms in comparison to the large labor forces of an economy. Reference 11Â  Author’s analysis of the Bureau of Labor Statistic’s Current Population Survey data for March 2010. http://www. downsizinggovernment. org/labor/negative-effects-minimum-wage-laws#top Question 3: Impacts of an Appreciating Currency In the case of appreciation of the yen, the following impacts could occur to Japanese firms * The first effect would be on the negative effect of exports and as a result would cause the firms to become less competitive based on price. * Another effect would be as a result of the exchange rate fluctuations. Certain firms might not be protected to negative fluctuations as a result of dealing with yen as their primary mode of currency. This therefore can eat into the profitability of the Japanese firms and cause multinationals to shift overseas to a more stable country. Therefore in short, the reduction in exports due to an increase in the value of yen is because the Japanese goods have now become more expensive to other countries. Therefore this reduction directly affects the firms that deal with these exports and thus affects their profitability. However , in spite of the decrease in exports , Japanese firms now have the ability to expand overseas due to the higher purchasing power of the yen. One example of this phenomenon was when the liquor company Asahi took over the Independent Liquor from New Zealand for 1. 3billion dollars. How to cite Minimum Wage, Papers Minimum Wage Free Essays The concept of a minimum wage has been around for over a century; New Zealand was the first country to have a minimum wage, enacted in 1894. The United States introduced minimum wage during the Great Depression in 1938. (Anderson) A minimum wage is a price floor; this sets a base line wage that companies have to pay their employees. We will write a custom essay sample on Minimum Wage or any similar topic only for you Order Now Currently in the United States nearly 75 million people work minimum wage jobs. (Goldstein) In 2004 the federal minimum wage was $5. 15 an hour and only 12 states had higher minimum wages. (Wall Street Journal) Today it is $7. 5, last updated in 2009. Polling shows that the public supports an increase in the minimum wage. (Kusler) Minimum wage brings together theoretical economics and real world economics, by coming up with a number that is as close as possible to the natural equilibrium while still providing a wage that workers can live on. It has positives and negatives, but I think the positives outweigh the negatives. Proponents of the minimum wage want a base line wage that workers can earn so they are not taken advantage of and can earn enough to provide for their families. This side of the argument assumes that the employers are making a profit for themselves and will exploit their workers as much as they can. Minimum wage is a protection for workers from getting exploited and not being able to provide for their families. Many argue that minimum wage is too low at this time, leaving millions of workers still needing assistance from the government, which is paid by tax payers. As tax payers we are picking up the slack of low wages paid to low earning employees. By increasing the minimum wage, we would be giving more purchasing power to the people who are most likely to spend it. For example, in 2009 in Georgia the minimum wage was the current minimum wage of $7. 25. If you spend a third of your income in housing, the recommended amount, to rent a one bedroom apartment in Atlanta of about $800 you would need to earn $16 an hour. (Gatlin) As this example illustrates, the wage that workers are getting today is not allowing them to support themselves, making the government have to step in with social services to help them. (The Wall Street Journal) If minimum wage had increased with inflation from 1968, people would be earning $9. 2 an hour, which is a lot closer to a living wage. (Gatlin) Other calculations suggest that if it had followed that path today, the minimum wage would be $10. 55. (Goldstein) Earning more is a reward for low wage workers, they are more likely to be loyal, more productive, less likely to not show up for work and shirk their duties. What owners think they save in payroll with paying workers less, they spend looking for new employees beca use old employees are leaving for jobs that pay higher wages. They also lose the investment that they made in training the person, that training will now have to be invested in someone else. Micah Domato, who runs A. L. Bazzini, a store that sells nuts, in New York City pays his employees an entry wage of $8; he keeps it at that level because other stores would not be able to compete with his pricing. (Wall Street Journal) If employers restructure their wage scales almost 400,000 more workers would benefit; they are the ones working slightly above minimum wage. Indeed, on January 1st, 2012 eight states raised their minimum incomes to adjust for inflation and over 1 million workers benefited. There is so much agreement on this topic that both Mitt Romney and President Barack Obama have said that they support an automatic increase to keep up with inflation. (Kusler) In conclusion, raising the minimum wage will give purchasing power to low income earners who are the people who need it the most. It will also create more business because people will be buying more with their increased incomes. People who are against minimum wage feel that it creates a surplus of unemployed workers. This surplus can’t get hired because there isn’t enough money to pay them from the profits that they are making at that level of production. Not only will it slow job growth, but an increased minimum wage will actually lead to even more job losses than the first minimum wage. For example, in 2009 in Georgia, the unemployment rate rose from 4. 5% to 10. 7% in 18 months around the time when the latest minimum wage was set. This price floor will limit job creation in the long run for the least skilled workers. Their employers will have to calculate if the new hourly wage exceeds their hourly product of labor, and then employers will have to see if they should substitute the worker with a more productive worker that will work at a level that is more than his or her wage or they will keep the costs they would have spent on a worker. In both cases, increasing minimum wage is a risk for the current worker. An alternative for minimum could be income subsidies, which can be considered less market intrusive. (Kusler) The National Federation of Independent Business says a tax credits for heads of households is another good alternative that won’t shrink job opportunities or place collateral damage on small businesses. Higher wages can discourage employers from hiring new employees because they can’t afford them. They will in turn maximize their profits with their current employees. The governor of New York in 2004 George Pataki said he would rather the increase be federal minimum wage than state wide because it gives states with lower minimum wages an advantage. In the end, an increase in the minimum wage is feared to only bring disaster. Fewer people will get hired and small business will have to take on a cost they cannot afford. This issue has been debated close to home as well. On November 6 of this year, San Jose passed a law with 58% of the vote that would increase the city-wide minimum wage from $8 to $10 an hour. This new minimum wage is what it was in 1968, adjusted for inflation. Only San Francisco, Washington DC, Santa Fe and Albuquerque have set their own minimum wage before. The measure started in a San Jose State University classroom. The students drafted the measure and got enough signatures to turn their idea into Measure D. Goldstein) In San Jose an average minimum wage worker salary is $1,280, which is not even enough to cover the average rent of $1,800. More people, therefore, have to rely on government assistant to get by. This new law will help 40,000 low wage workers. (Myers-Lipton) The Mayor of San Jose, Chuck Reed, sided against it and the City Council was divided. The Mayor says that it will t ake about $600,000 to put the law in place because they have to make sure everyone follows it. This will put a huge strain on the city’s budget, in addition to the 25% increase in their pay roll for the city’s own minimum wage workers. The opposition says that this increase would lead to cuts in staffing or hiring fewer workers. For example Fourth Street Pizza says that they will have to consider some increase in their prices so they don’t have to lay any one off. (Rusk) Measure D will go in effect early 2013. Only the future will say what effect this measure will have on the economy of San Jose, I hope it proves to be a positive outcome. Minimum wage helps keep a balance between the theoretical economic world and the real world by giving workers better wages than they would otherwise have. The big debate now in many states and municipalities is whether to keep it or increase it. Increasing would lead to workers having better lives and being more loyal and productive at work. Others say increasing it would lead to staffing cuts and fewer jobs because firms wouldn’t be able to cover their cost of paying workers more or having more of them. San Jose just raised its city minimum wage by voter approval. In the future it could go both ways, but hopefully it will improve the economy because people will have more money so they will spend more money. How to cite Minimum Wage, Essay examples