If the minimum wage is set too high, it will likely affect a large number of workers and this could have unexpectedly large impacts on average labour costs and on the total wage bill that employers must pay. This, in turn, could trigger price inflation and/or reduce the level of employment.
Raising the minimum wage would increase the cost of employing low-wage workers. As a result, some employers would employ fewer workers than they would have under a lower minimum wage. However, for certain workers or in some circumstances, employment could increase.
Answer and Explanation: When the government sets the minimum wage above the equilibrium wage, it creates unemployment in the market. Besides, the higher minimum wage will create a disparity between the labor demanded and labor supplied.
Some economists argue that raising the minimum wage artificially creates imbalances in the labor market and leads to inflation. Other economists note that when minimum wages have been raised historically, inflation did not follow.
According to the basic economics 101 explanation, an increase in the minimum wage motivates more people to enter the labor market because they will earn more money. At the same time, an increase in the minimum wage increases firms' costs and the quantity of labor demanded decreases (firms hire fewer workers).
Opponents of raising the minimum wage believe that higher wages could have several negative repercussions: leading to inflation, making companies less competitive, and resulting in job losses.
Motivation. The main case for a minimum wage is that it helps poor and low-income families earn enough income. However, the potential downside is that it may discourage employers from using low-wage, low-skill workers. If minimum wages reduce employment for low-skill workers, winners and losers will emerge.
Minimum-wage legislation prohibits wages from falling low enough to equate the number of people seeking jobs with the number of jobs being offered. As a result, the supply of unskilled labor permanently exceeds the demand for' unskilled labor at the government-mandated minimum wage.
Some studies find that the minimum wage has significant benefits for workers; others conclude that it is harmful. Many studies have been inconclusive. Even so, there appears to be a growing consensus that when the minimum wage is set at a moderate level, the impact on employment is modestly negative.
Alternatively, other financial experts point to the cons of raising the minimum wage, including potentially increasing the cost of living, reducing opportunities for inexperienced workers, and triggering more unemployment.
The "Fight for $15" movement started in 2012, in response to workers' inability to cover their costs on such a low salary, as well as the stressful work conditions of many of the service jobs which pay the minimum wage.
A higher minimum wage will most benefit families with the least income low- income and lower middle-class families. Seventy-six percent of the benefits of the Clinton minimum wage proposal will go to working families with below average incomes.
The preponderance of evidence suggests that increases in minimum wages decrease smoking and the number of days with health limitations and increase birthweights among infants of low-wage or low-skilled workers. Effects are more mixed for other populations such as teenagers and noncontinuously employed adults.
More than half of all affected workers are prime-age workers between the ages of 25 and 54. Although men make up a larger share of the overall U.S. workforce, the majority of workers who would be affected by a raise to the minimum wage (57.9 percent) are women.
Some research suggests that wage increases can improve health by influencing the individual behaviors that affect health, such as increased fruit and vegetable consumption, or even better mental health as a result of increased leisure time or job satisfaction.
It is well established in the international literature that minimum wage increases compress the wages distribution. Firms respond to these higher labour costs by reducing employment, reducing profits, or raising prices.
Raising the federal minimum wage to $15 an hour would improve the overall standard of living for minimum wage workers. These workers would more easily afford their monthly expenses, such as rent, car payments, and other household expenses.
While economists traditionally worry about a wage-price spiral, there remains no evidence that wages are causing increases in inflation. Workers need pay raises after decades of stagnation, and simply put, wages and employment do not—and should not—have to decline to bring down inflation.
The Congressional Budget Office, for example, projected that an increase to a $15 minimum wage by 2025 could mean an average of 1.4 million jobs lost, a fall in business revenues leading to a $9 billion drop in real income, and increases in the prices of goods and services across the economy.
The national minimum wage was created by Congress under the Fair Labor Standards Act (FLSA) in 1938. Congress enacted this legislation under its authority in Article I, Section 8 of the U.S. Constitution: “The Congress shall have power to . . . regulate commerce . . .
The Regulations on Enterprises Minimum Wage was made to "ensure the basic needs of the worker and his family, to help improve workers' performance and to promote fair competition between enterprises." One monthly minimum wage was set for full-time workers, and one hourly minimum wage for part-time workers.
The National Minimum Wage applies to employees not covered by an award or registered agreement. This is the minimum pay rate provided by the Fair Work Act 2009 and is reviewed each year. As of 1 July 2022 the National Minimum Wage is $21.38 per hour or $812.60 per week.
Australia (Australian dollars, $A)
The Federal Minimum Wage (FMW) (for persons aged 21 years and over) was established by the Australian Industrial Relations Commission (AIRC) in its April 1997 Safety Net Review - Wages decision.
Employee Facts
Wage increases can push the employee's annual income into a higher tax bracket, of imposing a higher marginal tax rate on the individual. Minimum wage employees usually have lower wealth than other individuals in the economic marketplace.