Minimum Wage: Effects on the Economy

Minimum Wage: Effects on the Economy Name Institution Course The minimum wage which is usually set by legislation wing of the government or based on a decision by a competent authority is defined as the minimum basic pay that an employer is expected to reward his workers. The underlining intention for a country to set policy for a minimum wage is mainly to protect workers against exploitation from selfish employers. Also, the reason why lawmakers are keen to follow this policy of minimum wage is to avoid inequality and even for the sole purpose of raising living standards of laborers in a country. There is a correlation between minimum wage and economy as discovered in this essay. The relationship can be negative or positive depending on different players in the world of economics. Minimum wage earners are in the different economic sector, like in developing countries they are unskilled laborers that are found in construction, textile, garment, and footwear industry while in developed countries these are laborers in the hotel, retail, nursing, and home industry. Therefore, when the minimum wage raises the living standard of such workers who are mostly considered unskilled hence uneducated. Before determination of a minimum wage, there are different factors that determine: the size of laborers that are to affected by the salary, the effect of the salary once its implemented especially the ripple effect of those who are higher level or bracket of the minimum wage and finally the response in regards to complying to the regulation is concerned. The factors end up determining the kind of minimum wage system a country will use. Some country uses complex wage system while others will use complex wage system. People in business are the primary supporter of raising the minimum wage; this because looking from their perspective is that there will be a drastic change in consumer expenditure as it will increase their spending habit which will have a positive result on primary business which will also affect the economy positively Dube et al. (522-543). For a country to maintain a balance and positive effect of the economy, there is a need to have a minimum wage bill that protects all workers. Also, an adequate wage bill covers working hours of the country workforce; ensuring that law and favorable to the laborers guide the hours. From the minimum wage, literature is quite evident that the minimum wage of a country directly affects the economy. Minimum wage affects the economy through labor productivity; labor productivity is the economic factor that policymaker are keen to study before coming up with a wage bill. Data on productivity gives accurate information of the market value of the product produced by the workers on the minimum wage bracket and many economists measure the average labor productivity as GDP per worker, and the data informs the set of the wage bill. On this note, the economist has o...