(adapted from an article by Richard Thomas, eHow Contributor)
The issue of “minimum wage” is familiarly referred to those unskilled services many youngsters take on in their teens to earn pocket money. However, few are aware that the minimum wage is actually an imported concept found in most countries, and that its effects are the subject of a long-standing debate among economists and labour experts.
Identification
The minimum wage is the lowest rate at which a worker can be paid. There are minimum wage laws pegged to hourly, daily and even monthly rates. Also, a minimum wage law usually makes it illegal for a person to sell his labour for less than the minimum rate.
Function
The general purpose of a minimum wage law is to guarantee a living wage to all workers who work a standard period of time, whatever that may be. In theory, any labourer who works 40 hours a week on minimum wage should be at or above the poverty line. However, the minimum wage has not kept pace with inflation and cost of living increases, and is now well behind that standard.
History
Minimum wage laws were first passed in Australia and New Zealand in the 1890s. They are now present in most countries, although how well they are enforced and the degree to which they guarantee a reasonable living is highly variable.
Effects
In USA, the minimum wage is set to rise to US $7.25 per hour by 2010. However, numerous states and even cities have laws that specify higher wages than are established according to the Federal minimum wage. This is sometimes done by stating that the local minimum wage is the Federal minimum wage plus an additional amount. For example, the District of Columbia has a wage rate that is always $1 higher than the Federal minimum. Other states pass laws that supersede the Federal minimum (almost always replacing it with a higher rate) or by adjusting the existing, state-mandated rate for inflation.
Considerations
Determining the real social and economic value of the minimum wage is tricky. Migrant labour, for example, is often done by illegal aliens who are rarely paid the minimum wage. At the same time, most citizens would want to do that work, given the same rate. Studies reveal that almost 75% economists think that the minimum wage increases unemployment, and only 10% believe that the minimum wage has a beneficial effect in combating poverty. However, there are clearly unskilled service industry jobs that are filled by minimum wage workers, workers who would obviously receive less were it not for the minimum wage.
Elvin Ong
