|
Minimum wage is the minimum hourly, daily or monthly wage which must be paid to employees or workers. Each country sets its own minimum wage laws and regulations, and more than 90% of all countries have some kind of minimum wage legislation. and the OECD do not consider that the minimum wage can be directly linked to unemployment in countries which have suffered job losses. Legislation in the Western industrialized world The first moves to legislate wages did not set minimum wages, rather the laws created arbitration boards and councils to resolve labour conflicts before the recourse to strikes. The established similar boards In the United States and other countries, minimum wage laws were a common demand of labor unions. Australia New Zealand Canada Main article: Minimum wages in Canada Under the Canadian Constitution's federal-provincial division of powers, the responsibility for enacting and enforcing labour laws rests with the ten provinces; the three territories also having been granted this power by virtue of federal legislation. This means that each province and territory has its own minimum wage. The lowest general minimum wage in force as of July 2006 is that of New Brunswick ($6.70/hour), the highest is that of Nunavut ($8.50/hour). Some provinces allow lower wages to be paid to liquor servers and other tip earners, and/or to inexperienced employees. British Columbia allows employers to pay as little as $6/hour to an inexperienced worker. The federal government could theoretically set its own minimum wage rates for workers in federal jurisdiction industries (railways for example). As of 2006 however, the federal minimum wage is defined to be the general adult minimum wage rate of the province or territory where the work is performed. This means, for example, that a railway company could not legally pay a worker in British Columbia less than $7/hour regardless of the worker's experience. France Ireland United Kingdom Municipal regulation of wage levels began in some towns in 1524. Later, the Trade Boards Act of 1909 initially created four Trades Boards that set minimum wages which varied between industries for a number of sectors where 'sweating' was generally regarded as a problem and where collective bargaining was not well established. This system was extended considerably after the Second World War; in 1945 Trades Boards became Wage Councils, which set minimum wage standards in many sectors of the economy, including the service sector as well as manufacturing. Wage Councils were finally abolished in 1993, having fallen into decline due, in large part, to Trades Union opposition. A lower limit of pay, or 'pay floor' was regarded as threatening the voluntary system of collective bargaining favoured in the UK. Government had first made a serious attempt to abolish Wage Councils in 1986, having abandoned existing legislation that tried to widen the scope of voluntary agreements to include those firms that had not taken part in negotiations, such as the Fair Wages Resolutions. These required that government contractors pay fair wages and respect the rights of their employees to be members of trades unions. A national minimum wage was introduced for the first time by Prime Minister Tony Blair's Labour government in April 1999, at the rate of £3.60 (US$5.78 at 1st April 1999 rate) per hour for those workers aged 22 and over. This rate was set after the Low Pay Commission, an independent body the Government appointed in July 1997 to advise it on low pay, recommended the rate. The LPC exists to this day to maintain the national minimum wages, which are uprated following its recommendations each October. The LPC board consists of nine members - three trade unionists, three employers, and three labour market relations experts. The Commission is widely regarded as a successful example of a 'social partnership', and undertakes consultations each year in order to gather all available evidence before making its recommendations. The current minimum wage in the UK for adults aged 22 or older is £5.35 ($10.01US), compared with $5.15 in the US. For workers between the ages of 18 and 21, or any workers who are in the first six months of their job and receiving accredited training, the minimum wage is £4.45 ($8.33US) per hour. The minimum hourly wage for all workers under the age of 18 (who are no longer of compulsory school age) is £3.30 ($6.18US). There is no minimum wage for those still of compulsory school age. Some workers undertaking apprenticeships or accredited training can be exempted for a certain amount of time; this varies according to their age and the length of time they have been in employment. Other categories of worker who are exempt include Au Pairs, Share Fishermen, Clergy, those in the Armed Forces, Prisoners and some people working in family businesses. There are some areas in which minimum wage legislation becomes complex, including the aforementioned exemptions for apprentices and trainees and cases where the accommodation offset applies. Unlike other areas of employment rights legislation in the UK, the National Minimum Wage has compliance teams to support its enforcement. Workers who think they are being paid less than the minimum wage can either make a complaint directly to HM Revenue and Customs on 0845 6000678 or seek advice from another source such as their local Citizens Advice Bureau or the Scottish Low Pay Unit - this is particularly recommended if other employment rights issues are involved, as the HMRC can only deal with minimum wage enquiries. See also: National Minimum Wage Act 1998 United States The first attempt at establishing a minimum wage in the United States came in 1933, when a $.25-per-hour standard was set as part of the National Industrial Recovery Act. However, in 1935's Schechter Poultry Corp. v. United States (295 U.S. 495), the United States Supreme Court declared the act unconstitutional, and the minimum wage was abolished. The minimum wage was re-established in the United States in 1938 (pursuant to the Fair Labor Standards Act), once again at $.25 per hour ($3.22 in 2005 dollars.) It had its highest purchasing value ever in 1968, when it was $1.60/hour ($9.12 in 2005 dollars.) The current federal minimum wage is now $5.15 an hour. During his presidency, Bill Clinton gave states the power to set their minimum wages above the federal level. As of April 2006, 18 states had done so. As of 2006, Oregon has the highest minimum wage: $10.45 per hour, with additional state-sponsored minimum wages for single parents. Previously, Santa Fe, New Mexico's $9.50-per-hour minimum wage was the highest in the nation. Many states increased their minimum wages on October 1, 2006, such as Michigan • Other countries Debate over consequences of minimum wage laws
Costs and benefits Supporters of the minimum wage claim it has these effects: Opponents of the minimum wage claim it has these effects: The aforementioned arguments, both pro and con, are largely empirical in nature. That is, debate of these arguments centers on the application of data and analytic techniques. By contrast, debate of theoretical arguments (see below) center on the application of logical reasoning. Some labor union contracts are based on the minimum wage; this produces a natural constituency to lobby for increases among union workers who typically earn far more than the minimum. Some public grants or taxes are also based on a multiple of the minimum wage, and this also can produce lobbying incentives in either direction. (For example, a worker may have an exemption if his earnings are below 2.5 times the minimum wage.) Recent trends in the U.S. Some idea of the empirical problems of this debate can be seen by looking at recent trends in the United States. The minimum wage fell about 29% in real terms between 1979 and 2003. Yet real wages have risen in the free market anyway, with real hourly earnings up by 7% since 1997. Some argue that a declining minimum wage might reduce youth unemployment (since these workers are likely to have fewer skills than older workers).• Over all, there is no consensus between economists about the effects of minimum wages on youth employment, although empirical evidence suggests that this group is most vulnerable to too high minimum wages. Views of Card and Krueger The more common debate is on changes to minimum wages. This unified view was challenged by empirical research done by David Card and Alan Krueger. In their 1997 book Myth and Measurement: The New Economics of the Minimum Wage (ISBN 0-691-04823-1), they argued the negative employment effects of minimum-wage laws to be minimal if not non-existent (at least for the United States). For example, they look at the 1992 increase in New Jersey's minimum wage, the 1988 rise in California's minimum wage, and the 1990-91 increases in the federal minimum wage. In each case, Card and Krueger present evidence ostensibly showing that increases in the minimum wage led to increases in pay, but no loss in jobs. That is, it appears that the demand for low-wage workers is inelastic. Also, these authors reexamine the existing literature on the minimum wage and argue that it, too, lacks support for the claim that a higher minimum wage cuts the availability of jobs. Critics of this research, however, argue that their research was flawed•. For example, Card and Krueger gathered their data by telephoning employers in Pennsylvania and New Jersey, asking them whether they intended to increase, decrease, or make no change in their employment. Subsequent attempts to verify the claims requested payroll cards from employers to verify employment, and ostensibly found that the minimum wage increases were followed by decreases in employment. On the other hand, data analysis by David Neumark and William Wascher, economists who are usually critical of minimum-wage increases, supported the Card/Krueger results.* Another possible explanation on why minimum wage laws may not decrease unemployment in the United States is that the minimum wage is set close to the equilibrium point for low and unskilled workers, thus absent the minimum wage law and unskilled workers would be paid approximately the same amount. However, a dramatic increase above this equilibrium point would likely bring about increased unemployment for the low and unskilled workers. Agreement with Card and Krueger Since the introduction of a national minimum wage in the UK in 1999, its effects on employment were subject to extensive research and observation by the Low Pay Commission. The bottom line there is, employment has not been reduced, productivity has increased in affected companies (especially service companies), and neither trade unions nor employer organisations contest the minimum wage, although especially the latter had done so heavily until 1999. From the other side, some leading economists accept the Card/Krueger works and agree with their results *. Disagreement with Card and Krueger According to the Joint Economic Committee of the United States Congress, Card and Krueger's work flies directly in the face of every piece of empirical research done on minimum wage laws within the United States within the past 50 years. Minimum wage laws have been shown to cause large amounts of unemployment, especially among low-income, unskilled, black, and teenaged populations, as well as cause a host of other mal-effects, such as higher turnover, less training, and fewer fringe-benefits. Theoretical arguments The traditional economic argument views the labor market as largely competitive. In competitive markets, the market price settles to the marginal value of the product. Therefore, under the competitive assumption, absent a minimum wage, workers are paid their marginal value. As is the case with all (binding) price floors, minimum wage laws are predicted to result in more people being willing to offer their labor for hire, but fewer employers wishing to hire labor. The result is a surplus of labor, or, in this case, unemployment. An alternate view of the labor market has low-wage labor markets characterized as monopsonistic competition wherein buyers (employers) have significantly more market power than do sellers (workers). Such a case is a type of market failure and results in workers being paid less than their marginal value. Under the monoposonistic assumption, an appropriately set minimum wage could increase both wages and employment, with the optimal level being equal to the marginal productivity of labor. This view emphasizes the role of minimum wages as a market regulation policy akin to antitrust policies, as opposed to an illusory "free lunch" for low-wage workers. Detractors point out that no collusion between employers to keep wages low has ever been demonstrated, asserting that in most labor markets, demand meets supply, and it is only minimum wage laws and other market interference which cause the imbalance. See also | |||||||||
|
| ||||||||||
 |
|
| |