MINIMUM WAGE: FOR AND AGAINST

Nguyn Ngc Thy Phng, Kamilla Mukhametshina, Valentina Vasilkova, Sara MacKay LD11S1

What is minimum wage?

A minimum wage is the lowest hourly, daily or monthly

payment that employers may legally pay to workers. Equivalently, it is the lowest wage at which workers may sell their labour. Usually it is issued either by the State Government or the Federal Government. Also minimum wage is used as the basis for calculating the salary scales of salary levels and allowances made some other mode prescribed by law.

Some facts about minimum wage

Minimum wage was originated in the 1890s in New

Zealand and Australia, minimum wages spread to the United Kingdom in 1909 and to nearly one-third of U.S. states during the next two decades. In 1938, the U.S. Congress passed a federal minimum wage law as part of the Fair Labor Standards Act. Since that time, minimum wages have been introduced in some form or another in numerous other countries.
20 out of 27 EU member states have a general statutory minimum

wage laid down by the government, usually a say in the process by trade unions and employers. Seven EU member states have no national statutory minimum wage: Denmark, Sweden and Finland as well as Germany, Austria, Italy and Cyprus rely on collective agreements alone.

Minimum wage? A-OK!

Pros of minimum wage

Protecting low paid worker Reducing Unemployment Adults keep job Reducing income gap Incentive to work- Stimulating the Economy.

Pros of minimum wage continued

Less worker abuse Encouraging productivity Forced sharing of wealth; Minimizing exploitation.

Minimum wage? NO WAY!

Cons of minimum wage

Minimum wage: slows job growth and increases unemployment; does not ease poverty; leads to cost-push inflation; makes employment of young people almost impossible; decreases investments to employees; is applied inconsistently.

Treatment of minimum wage

Wage rate (W) Labour supply

W1 W0

Minimum wage

Labour demand

Q2

Q1

Q3

Quantity of labour (Q)

Case study: Minimum wage A-Ok!

States with Minimum Wages above the Federal Level have had Faster Small Business and Retail Job Growth Fiscal Policy Institute www.fiscalpolicy.org March 30, 2006

CASE STUDY
Case study conducted in the United Sates between 1997 and 2005 States with the higher minimum wage grew 5.4% from 1998 to 2003 vs. 4.2% Higher minimum wage states had high job growth at (6.7% vs. 5.3%) Higher minimum wage states had higher payroll growth rate(24.5% vs. 21.2%)

Compared economic activity of small retail shops (less than 50 employees) in states that paid national minimum wage $5.15/hour and states that paid more than minimum wage

More retail jobs for higher minimum wage states

Case study: Why did this happen?

small businesses may have benefited from some combination of higher productivity through improved worker retention and savings on recruitment and training. if you pay workers more, they can buy more, boosting the overall economy, especially among small retail businesses.

CASE STUDY ON ESTABLISHING A MINIMUM WAGE IN HONG KONG (1932-2011)

For a minimum wage : Against a minimum wage: Minimum Wage Legislation The Minimum Wage Ordinance,1932 it has never been put to actual use. Trade Boards Ordinance, 1940 it has never been applied. In sum, till 2011, there has been no provision for a economy-wide statutory minimum wage in Hong Kong

Arguments of Hong Kong Special Administrative Region Government against min wage
Wages should be determined by the free market. The imposition of a minimum wage may cause higher

unemployment. A minimum wage system is an ineffective tool to alleviate the problem of poverty. The imposition of a minimum wage system may be harmful to the economic recovery and competitiveness of Hong Kong. A minimum wage system will increase production costs, especially in labour-intensive businesses. This may discourage overseas investments in Hong Kong.

The Hong Kong Social Security Society advocates for a min wage
Safety net of offering minimum acceptable protection for

workers and ensuring a minimum standard of living.

Protection of semi-skilled and low-skilled workers, new

arrivals who are relatively advanced in age, and female workers. Reducing of the gap between the rich and the poor. Cutting down spending on the Social Security Assistance and prevent low-income earners from falling below the poverty line. Maintaining of social stability.

Hong Kong Sets Minimum Wage,2011.

The Minimum Wage Ordinance was passed on 17 July 2010 and will came into force on this year's Labour Day holiday, 1 May 2011. The new law will benefit 270,000 low-paid workers. The initial SMW rate is HK$28 per hour and such rate is subject to review every 2 years. For business groups, the decision will raise costs. Critics add that the law will undermine the traditional free market spirit. For failure to pay the SMW, the penalty is a maximum fine of HK$350,000 and imprisonment for 3 years. Protestors demanding a minimum wage of HK$33 per hour

Conclusion
The employment consequences of a minimum wage

are by no means certain. Much depends on the elasticity of demand for labour and the extent to which firms can offset the impact of the minimum wage by increasing gains in labour productivity and achieving other cost savings. But minimum wage always has positive and negative effects. And necessity of setting of minimum wage depends only on political, economical and social conditions in the country.

THANK YOU FOR YOUR KIND ATTENTION!