
#REDIRECT Minimum_wage
#REDIRECT Talk:Minimum_wage
The minimum wage is the minimum rate a worker can legally be paid (usually per hour) as opposed to wages that are determined by the forces of supply and demand in a free market. In most cases, the mimium wage acts as a price floor. Each country sets its own minimum wage laws and regulations, and many countries have no minimum wage. == History == 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. * In 1894, New Zealand established such arbitration boards with the Industrial Conciliation and Arbitration Act * In 1896, the state of Victoria, Australia established similar boards * In 1909, the Trade Boards Act was enacted in the United Kingdom, establishing four such boards * In 1912, the state of Massachusetts, United States, set minimum wages for women and children In the United States and other countries, minimum wage laws were a common demand of labor unions. == Consequences of minimum wage laws == If the law is successfully enforced, and if they are high enough in real vs. nominal in economics terms (or relative to the average wage), minimum wage laws are alleged to have various benefits and costs. === Hypothetical costs and benefits === Minimum wages may have the positive effect of: * Reducing wage slave, which may be exploitation. * Reducing the dependency of the low-paid on welfare, which may in turn reduce taxes or allow increases of other government outlays. * Stimulating economic growth by discouraging labor-intensive industries, thereby encouraging more investment in capital and training. * Encouraging many of those who would normally take low-wage jobs to stay in (or return to) school and thus to accumulate human capital. On the other hand, minimum wages may have the negative effect of: * Limiting employment of low-wage earners, increasing employment at sub-minimum levels and generally increasing unemployment. * Raising employment barriers for people with little or no work experience or formal education: if a worker's labor is not worth the minimum, he may not find employment at all. * Curbing economic growth by increasing the cost of labor. * Curbing economic growth by lowering the supply of labor. * Increasing the price of goods and services, since employers pass on employment costs in the form of higher prices. (Opponents of minimum wage often see a negative income tax, e.g., as a way to support the lower-waged jobs, with the money coming from those who pay taxes, not those who pay for the products including the unemployed) * Decreasing incentive for some low-skilled workers to gain skills. * Where implemented locally, making labor more expensive than in other areas, which may discourage inward investment and encourage local businesses to relocate their operations elsewhere. The effects of minimum wage laws, both positive and negative, may be increased by 'knock-on effects', with increased wages for workers already earning above the minimum wage. For example, some labor union contracts are based on a fixed percentage or dollar amount above the minimum wage. Certain public grants or taxes are based on a multiple of the minimum wage. (For example, a worker may have an exemption if his earnings are below 2.5 minimum wages.) ===Debate=== The costs and benefits arising from minimum wages are subject to considerable disagreement among economists, though the consensus among economics textbooks is that minimum wage laws should be avoided whenever possible as the costs exceed the benefits. Indeed, a survey in the Winter 2005 issue of the Journal of Economic Perspectives reports that exactly two-thirds of academic economists at top universities agree with the statement, "a minimum wage increases unemployment among young and unskilled." 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 Kreuger 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 elasticity. 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.[http://www.fee.org/vnews.php?nid=3896],[http://www.cato.org/pubs/journal/cj15n1-8.html] 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 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.[http://www.epinet.org/briefingpapers/minimumw_bp_1996.pdf] 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 vs. nominal in economics between 1979 and 2003. Yet real wages have risen in the free market anyway, with real hourly earnings up by 7 percent since 1997 (the last time the minimum wage was increased). Some argue that a declining minimum wage might reduce youth unemployment (since these workers are likely to have fewer skills than older workers). === Theoretical arguments=== As is usual in serious social science, any empirical conclusion is subject to doubt and is simply the basis for further questions and research. One key question is the possible theoretical explanation of the different results. The traditional view that minimum wages have significant negative effects on employment is straightforward if one assumes that labor markets for low-skill workers can be characterized as fitting the model of a perfect competition market, where the only role of wages is as a cost. On the other hand, if Card and Krueger's empirical research is valid, it may be explained by the efficiency wage hypothesis which states that higher wages may "pay for themselves" by increasing worker efficiency (i.e., labor productivity). Higher wages encourage a higher willingness of low-skill workers to stay with their current employers and to gain experience and skill, while the employers are more willing to train them. Alternatively, if monopsony exists, then an increase in the minimum wage can raise employment. Alan Manning's 2003 book, ''Monopsony in Motion: Imperfect Competition in Labor Markets'' (ISBN 0691113122) suggests that this kind of market is common if not ubiquitous in labor markets. Even if Card and Krueger's results are accurate, there may be a "tipping point" above which their conclusions do not apply and the standard economic consensus does apply. The possible validity of their research may be the result of political forces: in the United States, business political pressure on legislatures and Congress may have kept the minimum wage so low that it has little negative employment effect. Further, the Federal minimum wage has moved away from the presumed tipping point, becoming less relevant. It has fallen from about 50 percent of the average hourly wage in manufacturing during the late 1960s to less than 40 percent. Some argue that minimum wage laws "lock-out" the poorest individuals from obtaining employment by legally forbidding them to compete for jobs by offering to work for lower wages. This argument of course does not apply to the black economy. The idea that a lack of a minimum wage naturally directs employment opportunities to the most needy is viewed by some as a moral justification for the elimination of minimum wage laws. On the other hand, the fact that the working poor often struggle to support themselves without government support (eg food stamps), under the assumption that the minimum wage is a net benefit to these people, is a moral argument in favour of it. Some say that if developing countries had minimum wages, or minimum wages commensurate of those of developed countries, that jobs would not be exported to these poor individuals and their opportunity for economic advancement would be impeded. Others say that this overlooks the fact that movement of jobs applies above all to industries which require large quantities of unskilled or low-skilled labour, and that relative prices for such labour are very different. === Wage subsidies === If they exist, it is clear that some of the adverse effects can only occur when minimum wages are implemented and successfully enforced by government fiat: either these effects are a consequence of the cost of Wage Regulation or they do not exist. If, however, a floor on wages is implemented indirectly by providing ''wage subsidies'', there would not be decreased employment. However, since this program is not a "free lunch", some other economic damage may be created instead, as with an externality. On the other hand, it is possible that there are already externalities contributing to unemployment, and that subsidies at the right level would merely be Arthur Cecil Pigou solutions to these and would not actually cause any further harm after all. Research would need to be done to determine this. While straightforward Arthur Cecil Pigou subsidies would have funding problems, particularly when introducing them for the first time, there are other approaches. One was examined by Professor Kim Swales of the University of Strathclyde (See [http://www.faxfn.org/03_jobs.htm]). This avoids funding problems by not having an actual subsidy but a virtual one — the funds flow is always from employers to the government, being netted off by the virtual subsidy before funds ever change hands. This may also be analysed by means of game theory (e.g "the prisoner's dilemma" or "the tragedy of the commons"). Alternatively, in the United States, many economists see the "earned income tax credit" (EITC, a wage subsidy) in the Federal income tax as providing the poverty-fighting benefits of the minimum wage without the non-budgetary costs, while being superior to most welfare state anti-poverty programs. One problem has been that many of the working poor (the target of this program) have a hard time with the tax forms needed to receive the EITC payment. There may also be long delays between when the money is needed and when the EITC payments are received. That is, a person might become eligible for the EITC in April but then get laid off for the rest of the year. But this person would not get help from the credit until nearly a year later (since Americans pay their taxes in April). Further, like with the minimum wage, those people working at home taking care of children and other loved ones do not receive any benefits; only those doing paid labor are rewarded. Finally, if these kinds of "complications" do not exist, it is possible that the benefit of the tax credit is received by the employer: assume that for low-skill workers the equilibrium market wage equals "X." Before the EITC is introduced, all of this wage is paid by their employers. After the EITC is instituted, the workers receive Y + Z, where Y is the new wage paid by employers and Z is the tax credit. If the labor market returns to the same equilibrium, then X = Y + Z. This means that the low-skill workers receive exactly the same amount as before the EITC was introduced and that the employer is paying less to the employees. This issue needs to be examined further. == Worldwide minimum wages == The list below gives the official minimum wage rates in some countries. Some countries are more effective than others at enforcing these laws, so that the ''effective'' minimum wage may be lower than the official one. Exchange rates as of 1 March 2005. {| | Country | Minimum wage | % of GDP per capita |- | Australia | AUD 484.40 per week; most workers receive higher wages through enterprise agreements or individual contracts | |- | Austria | none by law; instead, nationwide collective bargaining agreements set minimum wages by job classification for each industry; the accepted unofficial annual minimum wage is euro10,000 to €11,000 (United States dollar13,260 to US$14,580) | |- | Belgium | €1,243 (US$1,650) a month for workers over 21 years of age; 18-year-olds must be paid at least 82 percent of the minimum, 19-year-olds 88 percent, and 20-year-olds 94 percent of the minimum. | 52% |- | Brazil | Real (currency)300 (US$115) a month; annually adjusted by the Government | 33% |- | Bulgaria | 150 leva (US$102) per month | 37% |- | Canada''' | set by each province and territory; hourly wages vary from CAN$5.90 (US$4.7) to CAN$8.00 (US$6.4) to CAN$8.50 (US$6.8); Ontario and Alberta have a minimum wage rate for youths lower than their respective minimums for adult workers; ''see'' List of minimum wages in Canada | |- | Chile | 120,000 Chilean peso (US$210) per month for those aged 18–65; 90,327 pesos (US$160) for those younger than 18 and for those older than 65; and 78,050 pesos (US$135) for honorary payments; subject to adjustment annually | 40% |- | Cuba | 225 Cuban peso (US$210) per month as of International Labor Day, 2005, increased from 100 pesos per month previously. | |- | '''People's Republic of China | none | |- | Denmark | none by law, but national labor agreements effectively set a wage floor; the average net wage including pension benefits of adult workers in 2003 was 177 kroner (US$32) per hour | |- | Finland | 5,39 euros per hour or 926,40 euros per month, except where collective bargaining agreements have negotiated higher sector-specific minimum wages (anywhere from 1000 euros to over 2000 euros) | |- | France | €7.61 (US$10) per hour | |- | Germany | none by law (but in discussion); set by collective bargaining agreements | |- | Greece''' | €28 (US$37) daily and €616 (US$817) monthly; set by the GSEE and the Employers' Association through collective bargaining and routinely ratified by the Ministry of Labor | 47% |- | Hong Kong | none | |- | Hungary | 53,000 Forint (US$290) per month; set by the IRC through agreement among its participants, representatives of the Government, employers, and employees | 32% |- | Israel | Above age 18: 47.5% of the average income on 1 April of each year. In 2005: 3335.18 New Israeli sheqel (approx US$760) per month. Under age 18, varies. | 50% |- | Italy | none by law; instead set by a collective bargaining agreements on a sector-by-sector basis; when an employer and a union fail to reach an agreement, courts may determine fair wages on the basis of practice in comparable activities, although this rarely occurs in practice | |- | Republic of Ireland | €7 (US$9) per hour | |- | Luxembourg | varies according to the worker's age and number of dependents; for a single worker over the age of 18 is €1,403 (US$1,860) per month for unskilled workers, and €1,684 (US$2,230) per month for skilled workers | 29%/34% |- | Netherlands | €1,249.20 (US$1,660) per month plus 8% holiday allowance, summing to €1,349.14 (US$1,720) (the amount is less for those 22 years old or younger) | 54% |- | New Zealand |NZD$9.50 (US$6.90) per hour for workers 18 years old or older, and NZ$7.60 (US$550) per hour for those aged 16 or 17. (Increased to these levels on 21 March 2005). | |- | Portugal | €374.70 (US$500) per month; covers full-time workers as well as rural workers and domestic employees ages 18 and over | 33% |- | Poland | 824 PLN (US$280) per month | 42% |- | Russia | 720 rubles (US$26) per month; to be raised to 800 rubles from September 1, 2005, and to 1,100 rubles from May 1, 2006 | |- | Romania | 3.3 million Romanian leu (US$110) per month | 37% |- | Spain | €490.80 (US$650) per month | 29% |- | Sweden | none by law; set by collective bargaining contracts every year | |- | Switzerland | none by law; it is normally 3,000 CHF (US$2,450) a month set by collective agreements | 56% |- | Turkey | 444 YTL (US$350) per month; reviewed every 6 months by the Minimum Wage Commission, a tripartite government-industry-union body | 89% |- | United Kingdom | Pound sterling3.00 (US$6) per hour for 16-to-17-year-olds who have finished compulsory education (except apprentices); £4.10 (US$8) per hour for 18-to-21-year-olds; £4.85 (US$9) per hour for 22-year-olds and above (£5.05 from October 2005) | |- | United States | the federal minimum wage is $5.15 per hour, although workers under age 20 can be paid $4.25 an hour for their first 90 days. Some states also have minimum wage laws ranging from $2.00 in Oklahoma (for some jobs not covered by the federal rate), to $7.35 an hour in Washington. Some cities and counties have living wage ordinances of up to $15.00 an hour although the groups of workers it applies to are often limited. (29 USC Sec. 206) (OK Statutes 40-197.5) (Revised Code of Washington Sec. 49.46.020) [http://www.lni.wa.gov/WorkplaceRights/Wages/Minimum/default.asp] | 25%* |} (*) 40 h/week; 50 weeks/year ==Minimum wage in the 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 Recovery Act. However, in 1935 the United States Supreme Court declared the National Recovery 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 ($8.85 in 2005 dollars.) During his presidency, Bill Clinton gave states the power to set their minimum wages above the federal level. As of 2004, 12 states had done so; and on November 2 of that year two additional states (Florida and Nevada) approved increases in statewide referendums. Some smaller government entities, such as counties and cities, observe minimum wages that are higher than the state as a whole; in some cases, the ordinance applies only to businesses that are under contract to the local government itself, while in others — most notably San Francisco — the higher rate is enforced across the board. San Francisco's $8.50-per-hour minimum wage is the highest in the nation. Many progressive politicians in the United States advocate linking the minimum wage to the Consumer Price Index, thereby producing small annual increases rather than the larger hikes that tend to be adopted when legislation to do so is passed. The vast majority of conservatives oppose this, but a few actually favor it, on the grounds that this would stop their opponents from, in their view, periodically exploiting the issue. Some cite the behavior of the U.S. Congress in defeating increases in the federal minimum wage, currently $10,300 per year ($5.15 per hour for a 40 hour work week based on 50 work weeks annually) for the last nine years (from 1996 to 2005) at the same time as repeatedly acting to increase their own annual salary by $28,500 to $162,000 over the last few years as an example of hypocrisy. ''See'' List of U.S. state minimum wages.
==Minimum wage in the United Kingdom== Municipal regulation of wage levels began in some towns in 1524. Later, the Trade Boards Act of 1918 made a large number of trades subject to minimum wages (which varied from trade to trade). These rules were repealed during the Margaret Thatcher era. A national minimum wage was introduced for the first time by Tony Blair Labour Party (UK) government. The current minimum wage in the UK is £4.85 or approximately $9, as compared with $5.15 in the US. Despite a much higher minimum wage, the UK has lower unemployment than the US. ''See'' National Minimum Wage Act. ==Reference== *[http://www.state.gov/g/drl/rls/hrrpt/2004/index.htm Country Reports on Human Rights Practices (2004)] (United States Department of State) ==See also== * Maximum wage * Social wage * Living wage * Wage slave * Labor market * ''Garcia v. San Antonio Metropolitan Transit Authority'' * Positive rights ==External links== * [http://www.cepr.net/ Center for Economic and Policy Research] * [http://www.epinet.org/content.cfm/issueguides_minwage_minwage The Economic Policy Institute] * [http://www.floridiansforall.org Floridians for All] * [http://www.aflcio.org/yourjobeconomy/minimumwage/staterates.cfm AFL-CIO Guide to State Minimum Wages] * [http://www.dti.gov.uk/er/nmw/ UK Department of Trade and Industry] Labor Macroeconomics
== Why there is no minimum-wage policies in HK? == Now the proposal of minimun wage and maximum working hour in HK Legco have been shot down. The heated arguement is about if the motion is unrealistic for the economy or it is good for working class and why HK can't have this policy while countries with free economy, like US,UK, have all legislated for a minimum wage. I have the wonder, too. What is the special situation in HK that make the proposal defeated? :My guess is that they're trying to keep up the image as the world's freest economy. Good for them. ----- I think the information about minimum wages in Danemark should be redimensioned to avoid a mass emigration of readers to Copenhagen. According to my information (taken from the E.U. website) there is no minimum wage by law in Danemark however there are Collective Agreement that sppecify a minimum wage, but only a small percentage of workplaces are regulated by them. The 11.90 euro per hour figure in particular should refer to white collar jobs. ----- I'd like historical information here as well as current minimum wages. Here's the data I collected a while ago, if someone wants to insert it somewhere: U.S. Federal Minimum Wage * 01/01/81 $3.35 * 04/01/90 $3.80 * 04/01/91 $4.25 * 10/01/96 $4.75 * 09/01/97 $5.15 Some links: * http://www.boli.state.or.us/technical/min-wage.html - link of above facts * http://www.fedminwage.com/ --User:Tomruen 08:21, 10 May 2004 (UTC) ---- Arguments for/against a :Minimum Wage increase: For: * It helps people that make the least money. -- How ? * It helps union workers because many union contracts are based on a fixed percentage/dollar amount over minimum wage. Indirectly helps union funds used for to pay union officials, retirement plans, and for lobbying political issues (such as an increase in the minimum wage) because union dues are a percentage of the hourly wage. Against: * It increases the cost of basic goods and services in proportion to the increase in labor costs from an increase in the minimum wage. It is claimed to offset any increase minimum wage workers receive. * Minimum wage workers usually earn minimum wage only for a short period of time and move to higher paying jobs. * Many minimum wage jobs are performed by part time workers and students. * It harms the people who make the least money -- a minimum wage law doesn't create any jobs, it simply outlaws some jobs (those which create little value). ---- There have to be some real reasons to be for or against an increase in the minimum wage. Not some generic 'it helps the little guy' or some generic 'it costs jobs' Can anyone list all off the things that are directly tied to the minimum wage level? * Social Security (United States) taxes paid (6.25 percent paid by wage earner and 6.25 percent paid by employer) * :Medicare taxes paid (1.2 percent paid by wage earner and 1.2 percent paid by employer) * Union contracts based on a fixed percentage/dollar amount over minimum wage * Unemployment taxes ?? * Worker's compensation insurance ?? ---- Basically, the economic effects very much depend on the relevent supply and demand curves and monopoly or monopsony effects. Ignoring monopoly and monopsony effects, an increase in minimum wage will increase the amount of the wage (duh) and decrease the amount of labor demanded. This will result in a surplus of labor and cause a dead weight loss. On the other hand, if the employer is a monopsony in the labor market, (or at least has significant monopsony power), then sometimes both the wage and the amount of labor hired will increase. If the sellers of labor have a monopoly (i.e. maybe there is a strong union) then they may demand some kind of increased wage and this will increase the amount of money that the members take home, even if somewhat less labor is employed. ---- Clearly, there is some informed discussion guiding the creation of this article. However, the poor grammar in the Further economic issues section in the version of 29 October 2003 makes it unintelligible. The article needs a rewrite so that the rest of us can understand it. User:Rossami 02:10, 30 Oct 2003 (UTC) == Card-Krueger Experiments == I just made some major revisions to the part of the article that deals with the Card-Krueger experiments, as it made no mention of the serious objections made to their methodology and conclusions. I was wondering if it might ultimately be better to put everything regarding C-K in a new section or perhaps an entirely separate article. User:Kmweber 23:04, 28 Aug 2004 (UTC) I would like it if you made it into a seperate article. I noticed you took more care to NPOV the pro C-K paragraphs than the con C-K paragraphs. --User:LegCircus 23:10, Aug 28, 2004 (UTC) The problem with saying "Some subsequent attempts..." is that it implies that attempts were made to verify C-K that agreed with the original findings. As there are no known instances of this, the leading "Some" is incorrect. : Weber cut the possible theoretical explanations of why C-K may be right. That is totally unjustified, so I'm putting them back. No matter what one thinks of this literature, C-K have made a major step in pushing economists away from a dogmatic and _a priori_ approach to the minimum wage question. BTW, it's been known for quite awhile that the data indicating a negative employment effect due to the minimum wage is very shaky (showing low statistical significance). User:Jdevine 16:51, 29 Aug 2004 (UTC) == EPI == I'm not sure how relevant this is, and perhaps it is ad hominem, but the link provided that further supports the Card-Krueger experiments was put out by the Economic Policy Institute. A substantial number of EPI's board of directors are affiliated with the AFL-CIO in some way or another.[http://www.epinet.org/content.cfm/board link]. Union members benefit greatly from the minimum wage since A.) It eliminates low-income labor alternatives that compete directly with union members, B.) Many union wages are a function of the minimum wage as deliniated in the contracts. Since most of the board of directors are on the AFL-CIO's payroll, would this mean that EPI's findings shouldn't be considered objective since there is such a vested financial interest involved? == Minimum wage and unemplyment == If there were no minimum wage, there would be no unemplyment. Get rid of the minimum wage, and the unemployment problem is solved.--User:Jerryseinfeld 02:28, 9 Jan 2005 (UTC) :Not true. While I agree that the minimum wage does contribute to unemployment, other barriers still exist. Full employment would only be possible in a world of cost-less mobility and perfect information, where employer and employee would be able to meet instantly and without cost. --User:4.14.71.241 05:52, 9 Jan 2005 (UTC) :Yeah, the problem with all those unemployed people is that they're dying to work for less than minimum wage but the government won't let them, and they haven't heard of the black economy... User:Rd232 11:13, 9 Jan 2005 (UTC) :Actually with a genereous welfare system even the lack of a minimum wage would not guarantee an end to unemployment. So long as marginal workers have alternate income options then the benefit of exchanging their time for low wages may still be outweighed by the cost. TERJE 2005-01-10. == Minimum wage in Finland == Sorry, but seems like your sources really don't understand the complex systems we have in scandinavian countries. I do believe the finnish version of wikipedia with lots of local experts checking the article a bit more trustworthy than the US state bureau. Pls see [http://193.209.217.5/in/internet/suomi/suomi.nsf/NET/120202142400EH] [http://virtuoosi.pkky.fi/vilma/tyoelama/sopimus.htm] [http://www.finlex.fi/fi/laki/ajantasa/haku.php?search%5Btype%5D=pika&search%5Bpika%5D=ty%C3%B6*&submit=Hae] -- User:Tmh 12:08, 8 Mar 2005 (UTC)
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#REDIRECT Minimum_wage
Minimum Wage
#REDIRECT Talk:Minimum_wage
Minimum wage
The minimum wage is the minimum rate a worker can legally be paid (usually per hour) as opposed to wages that are determined by the forces of supply and demand in a free market. In most cases, the mimium wage acts as a price floor. Each country sets its own minimum wage laws and regulations, and many countries have no minimum wage. == History == 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. * In 1894, New Zealand established such arbitration boards with the Industrial Conciliation and Arbitration Act * In 1896, the state of Victoria, Australia established similar boards * In 1909, the Trade Boards Act was enacted in the United Kingdom, establishing four such boards * In 1912, the state of Massachusetts, United States, set minimum wages for women and children In the United States and other countries, minimum wage laws were a common demand of labor unions. == Consequences of minimum wage laws == If the law is successfully enforced, and if they are high enough in real vs. nominal in economics terms (or relative to the average wage), minimum wage laws are alleged to have various benefits and costs. === Hypothetical costs and benefits === Minimum wages may have the positive effect of: * Reducing wage slave, which may be exploitation. * Reducing the dependency of the low-paid on welfare, which may in turn reduce taxes or allow increases of other government outlays. * Stimulating economic growth by discouraging labor-intensive industries, thereby encouraging more investment in capital and training. * Encouraging many of those who would normally take low-wage jobs to stay in (or return to) school and thus to accumulate human capital. On the other hand, minimum wages may have the negative effect of: * Limiting employment of low-wage earners, increasing employment at sub-minimum levels and generally increasing unemployment. * Raising employment barriers for people with little or no work experience or formal education: if a worker's labor is not worth the minimum, he may not find employment at all. * Curbing economic growth by increasing the cost of labor. * Curbing economic growth by lowering the supply of labor. * Increasing the price of goods and services, since employers pass on employment costs in the form of higher prices. (Opponents of minimum wage often see a negative income tax, e.g., as a way to support the lower-waged jobs, with the money coming from those who pay taxes, not those who pay for the products including the unemployed) * Decreasing incentive for some low-skilled workers to gain skills. * Where implemented locally, making labor more expensive than in other areas, which may discourage inward investment and encourage local businesses to relocate their operations elsewhere. The effects of minimum wage laws, both positive and negative, may be increased by 'knock-on effects', with increased wages for workers already earning above the minimum wage. For example, some labor union contracts are based on a fixed percentage or dollar amount above the minimum wage. Certain public grants or taxes are based on a multiple of the minimum wage. (For example, a worker may have an exemption if his earnings are below 2.5 minimum wages.) ===Debate=== The costs and benefits arising from minimum wages are subject to considerable disagreement among economists, though the consensus among economics textbooks is that minimum wage laws should be avoided whenever possible as the costs exceed the benefits. Indeed, a survey in the Winter 2005 issue of the Journal of Economic Perspectives reports that exactly two-thirds of academic economists at top universities agree with the statement, "a minimum wage increases unemployment among young and unskilled." 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 Kreuger 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 elasticity. 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.[http://www.fee.org/vnews.php?nid=3896],[http://www.cato.org/pubs/journal/cj15n1-8.html] 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 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.[http://www.epinet.org/briefingpapers/minimumw_bp_1996.pdf] 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 vs. nominal in economics between 1979 and 2003. Yet real wages have risen in the free market anyway, with real hourly earnings up by 7 percent since 1997 (the last time the minimum wage was increased). Some argue that a declining minimum wage might reduce youth unemployment (since these workers are likely to have fewer skills than older workers). === Theoretical arguments=== As is usual in serious social science, any empirical conclusion is subject to doubt and is simply the basis for further questions and research. One key question is the possible theoretical explanation of the different results. The traditional view that minimum wages have significant negative effects on employment is straightforward if one assumes that labor markets for low-skill workers can be characterized as fitting the model of a perfect competition market, where the only role of wages is as a cost. On the other hand, if Card and Krueger's empirical research is valid, it may be explained by the efficiency wage hypothesis which states that higher wages may "pay for themselves" by increasing worker efficiency (i.e., labor productivity). Higher wages encourage a higher willingness of low-skill workers to stay with their current employers and to gain experience and skill, while the employers are more willing to train them. Alternatively, if monopsony exists, then an increase in the minimum wage can raise employment. Alan Manning's 2003 book, ''Monopsony in Motion: Imperfect Competition in Labor Markets'' (ISBN 0691113122) suggests that this kind of market is common if not ubiquitous in labor markets. Even if Card and Krueger's results are accurate, there may be a "tipping point" above which their conclusions do not apply and the standard economic consensus does apply. The possible validity of their research may be the result of political forces: in the United States, business political pressure on legislatures and Congress may have kept the minimum wage so low that it has little negative employment effect. Further, the Federal minimum wage has moved away from the presumed tipping point, becoming less relevant. It has fallen from about 50 percent of the average hourly wage in manufacturing during the late 1960s to less than 40 percent. Some argue that minimum wage laws "lock-out" the poorest individuals from obtaining employment by legally forbidding them to compete for jobs by offering to work for lower wages. This argument of course does not apply to the black economy. The idea that a lack of a minimum wage naturally directs employment opportunities to the most needy is viewed by some as a moral justification for the elimination of minimum wage laws. On the other hand, the fact that the working poor often struggle to support themselves without government support (eg food stamps), under the assumption that the minimum wage is a net benefit to these people, is a moral argument in favour of it. Some say that if developing countries had minimum wages, or minimum wages commensurate of those of developed countries, that jobs would not be exported to these poor individuals and their opportunity for economic advancement would be impeded. Others say that this overlooks the fact that movement of jobs applies above all to industries which require large quantities of unskilled or low-skilled labour, and that relative prices for such labour are very different. === Wage subsidies === If they exist, it is clear that some of the adverse effects can only occur when minimum wages are implemented and successfully enforced by government fiat: either these effects are a consequence of the cost of Wage Regulation or they do not exist. If, however, a floor on wages is implemented indirectly by providing ''wage subsidies'', there would not be decreased employment. However, since this program is not a "free lunch", some other economic damage may be created instead, as with an externality. On the other hand, it is possible that there are already externalities contributing to unemployment, and that subsidies at the right level would merely be Arthur Cecil Pigou solutions to these and would not actually cause any further harm after all. Research would need to be done to determine this. While straightforward Arthur Cecil Pigou subsidies would have funding problems, particularly when introducing them for the first time, there are other approaches. One was examined by Professor Kim Swales of the University of Strathclyde (See [http://www.faxfn.org/03_jobs.htm]). This avoids funding problems by not having an actual subsidy but a virtual one — the funds flow is always from employers to the government, being netted off by the virtual subsidy before funds ever change hands. This may also be analysed by means of game theory (e.g "the prisoner's dilemma" or "the tragedy of the commons"). Alternatively, in the United States, many economists see the "earned income tax credit" (EITC, a wage subsidy) in the Federal income tax as providing the poverty-fighting benefits of the minimum wage without the non-budgetary costs, while being superior to most welfare state anti-poverty programs. One problem has been that many of the working poor (the target of this program) have a hard time with the tax forms needed to receive the EITC payment. There may also be long delays between when the money is needed and when the EITC payments are received. That is, a person might become eligible for the EITC in April but then get laid off for the rest of the year. But this person would not get help from the credit until nearly a year later (since Americans pay their taxes in April). Further, like with the minimum wage, those people working at home taking care of children and other loved ones do not receive any benefits; only those doing paid labor are rewarded. Finally, if these kinds of "complications" do not exist, it is possible that the benefit of the tax credit is received by the employer: assume that for low-skill workers the equilibrium market wage equals "X." Before the EITC is introduced, all of this wage is paid by their employers. After the EITC is instituted, the workers receive Y + Z, where Y is the new wage paid by employers and Z is the tax credit. If the labor market returns to the same equilibrium, then X = Y + Z. This means that the low-skill workers receive exactly the same amount as before the EITC was introduced and that the employer is paying less to the employees. This issue needs to be examined further. == Worldwide minimum wages == The list below gives the official minimum wage rates in some countries. Some countries are more effective than others at enforcing these laws, so that the ''effective'' minimum wage may be lower than the official one. Exchange rates as of 1 March 2005. {| | Country | Minimum wage | % of GDP per capita |- | Australia | AUD 484.40 per week; most workers receive higher wages through enterprise agreements or individual contracts | |- | Austria | none by law; instead, nationwide collective bargaining agreements set minimum wages by job classification for each industry; the accepted unofficial annual minimum wage is euro10,000 to €11,000 (United States dollar13,260 to US$14,580) | |- | Belgium | €1,243 (US$1,650) a month for workers over 21 years of age; 18-year-olds must be paid at least 82 percent of the minimum, 19-year-olds 88 percent, and 20-year-olds 94 percent of the minimum. | 52% |- | Brazil | Real (currency)300 (US$115) a month; annually adjusted by the Government | 33% |- | Bulgaria | 150 leva (US$102) per month | 37% |- | Canada''' | set by each province and territory; hourly wages vary from CAN$5.90 (US$4.7) to CAN$8.00 (US$6.4) to CAN$8.50 (US$6.8); Ontario and Alberta have a minimum wage rate for youths lower than their respective minimums for adult workers; ''see'' List of minimum wages in Canada | |- | Chile | 120,000 Chilean peso (US$210) per month for those aged 18–65; 90,327 pesos (US$160) for those younger than 18 and for those older than 65; and 78,050 pesos (US$135) for honorary payments; subject to adjustment annually | 40% |- | Cuba | 225 Cuban peso (US$210) per month as of International Labor Day, 2005, increased from 100 pesos per month previously. | |- | '''People's Republic of China | none | |- | Denmark | none by law, but national labor agreements effectively set a wage floor; the average net wage including pension benefits of adult workers in 2003 was 177 kroner (US$32) per hour | |- | Finland | 5,39 euros per hour or 926,40 euros per month, except where collective bargaining agreements have negotiated higher sector-specific minimum wages (anywhere from 1000 euros to over 2000 euros) | |- | France | €7.61 (US$10) per hour | |- | Germany | none by law (but in discussion); set by collective bargaining agreements | |- | Greece''' | €28 (US$37) daily and €616 (US$817) monthly; set by the GSEE and the Employers' Association through collective bargaining and routinely ratified by the Ministry of Labor | 47% |- | Hong Kong | none | |- | Hungary | 53,000 Forint (US$290) per month; set by the IRC through agreement among its participants, representatives of the Government, employers, and employees | 32% |- | Israel | Above age 18: 47.5% of the average income on 1 April of each year. In 2005: 3335.18 New Israeli sheqel (approx US$760) per month. Under age 18, varies. | 50% |- | Italy | none by law; instead set by a collective bargaining agreements on a sector-by-sector basis; when an employer and a union fail to reach an agreement, courts may determine fair wages on the basis of practice in comparable activities, although this rarely occurs in practice | |- | Republic of Ireland | €7 (US$9) per hour | |- | Luxembourg | varies according to the worker's age and number of dependents; for a single worker over the age of 18 is €1,403 (US$1,860) per month for unskilled workers, and €1,684 (US$2,230) per month for skilled workers | 29%/34% |- | Netherlands | €1,249.20 (US$1,660) per month plus 8% holiday allowance, summing to €1,349.14 (US$1,720) (the amount is less for those 22 years old or younger) | 54% |- | New Zealand |NZD$9.50 (US$6.90) per hour for workers 18 years old or older, and NZ$7.60 (US$550) per hour for those aged 16 or 17. (Increased to these levels on 21 March 2005). | |- | Portugal | €374.70 (US$500) per month; covers full-time workers as well as rural workers and domestic employees ages 18 and over | 33% |- | Poland | 824 PLN (US$280) per month | 42% |- | Russia | 720 rubles (US$26) per month; to be raised to 800 rubles from September 1, 2005, and to 1,100 rubles from May 1, 2006 | |- | Romania | 3.3 million Romanian leu (US$110) per month | 37% |- | Spain | €490.80 (US$650) per month | 29% |- | Sweden | none by law; set by collective bargaining contracts every year | |- | Switzerland | none by law; it is normally 3,000 CHF (US$2,450) a month set by collective agreements | 56% |- | Turkey | 444 YTL (US$350) per month; reviewed every 6 months by the Minimum Wage Commission, a tripartite government-industry-union body | 89% |- | United Kingdom | Pound sterling3.00 (US$6) per hour for 16-to-17-year-olds who have finished compulsory education (except apprentices); £4.10 (US$8) per hour for 18-to-21-year-olds; £4.85 (US$9) per hour for 22-year-olds and above (£5.05 from October 2005) | |- | United States | the federal minimum wage is $5.15 per hour, although workers under age 20 can be paid $4.25 an hour for their first 90 days. Some states also have minimum wage laws ranging from $2.00 in Oklahoma (for some jobs not covered by the federal rate), to $7.35 an hour in Washington. Some cities and counties have living wage ordinances of up to $15.00 an hour although the groups of workers it applies to are often limited. (29 USC Sec. 206) (OK Statutes 40-197.5) (Revised Code of Washington Sec. 49.46.020) [http://www.lni.wa.gov/WorkplaceRights/Wages/Minimum/default.asp] | 25%* |} (*) 40 h/week; 50 weeks/year ==Minimum wage in the 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 Recovery Act. However, in 1935 the United States Supreme Court declared the National Recovery 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 ($8.85 in 2005 dollars.) During his presidency, Bill Clinton gave states the power to set their minimum wages above the federal level. As of 2004, 12 states had done so; and on November 2 of that year two additional states (Florida and Nevada) approved increases in statewide referendums. Some smaller government entities, such as counties and cities, observe minimum wages that are higher than the state as a whole; in some cases, the ordinance applies only to businesses that are under contract to the local government itself, while in others — most notably San Francisco — the higher rate is enforced across the board. San Francisco's $8.50-per-hour minimum wage is the highest in the nation. Many progressive politicians in the United States advocate linking the minimum wage to the Consumer Price Index, thereby producing small annual increases rather than the larger hikes that tend to be adopted when legislation to do so is passed. The vast majority of conservatives oppose this, but a few actually favor it, on the grounds that this would stop their opponents from, in their view, periodically exploiting the issue. Some cite the behavior of the U.S. Congress in defeating increases in the federal minimum wage, currently $10,300 per year ($5.15 per hour for a 40 hour work week based on 50 work weeks annually) for the last nine years (from 1996 to 2005) at the same time as repeatedly acting to increase their own annual salary by $28,500 to $162,000 over the last few years as an example of hypocrisy. ''See'' List of U.S. state minimum wages.
==Minimum wage in the United Kingdom== Municipal regulation of wage levels began in some towns in 1524. Later, the Trade Boards Act of 1918 made a large number of trades subject to minimum wages (which varied from trade to trade). These rules were repealed during the Margaret Thatcher era. A national minimum wage was introduced for the first time by Tony Blair Labour Party (UK) government. The current minimum wage in the UK is £4.85 or approximately $9, as compared with $5.15 in the US. Despite a much higher minimum wage, the UK has lower unemployment than the US. ''See'' National Minimum Wage Act. ==Reference== *[http://www.state.gov/g/drl/rls/hrrpt/2004/index.htm Country Reports on Human Rights Practices (2004)] (United States Department of State) ==See also== * Maximum wage * Social wage * Living wage * Wage slave * Labor market * ''Garcia v. San Antonio Metropolitan Transit Authority'' * Positive rights ==External links== * [http://www.cepr.net/ Center for Economic and Policy Research] * [http://www.epinet.org/content.cfm/issueguides_minwage_minwage The Economic Policy Institute] * [http://www.floridiansforall.org Floridians for All] * [http://www.aflcio.org/yourjobeconomy/minimumwage/staterates.cfm AFL-CIO Guide to State Minimum Wages] * [http://www.dti.gov.uk/er/nmw/ UK Department of Trade and Industry] Labor Macroeconomics
Minimum wage
== Why there is no minimum-wage policies in HK? == Now the proposal of minimun wage and maximum working hour in HK Legco have been shot down. The heated arguement is about if the motion is unrealistic for the economy or it is good for working class and why HK can't have this policy while countries with free economy, like US,UK, have all legislated for a minimum wage. I have the wonder, too. What is the special situation in HK that make the proposal defeated? :My guess is that they're trying to keep up the image as the world's freest economy. Good for them. ----- I think the information about minimum wages in Danemark should be redimensioned to avoid a mass emigration of readers to Copenhagen. According to my information (taken from the E.U. website) there is no minimum wage by law in Danemark however there are Collective Agreement that sppecify a minimum wage, but only a small percentage of workplaces are regulated by them. The 11.90 euro per hour figure in particular should refer to white collar jobs. ----- I'd like historical information here as well as current minimum wages. Here's the data I collected a while ago, if someone wants to insert it somewhere: U.S. Federal Minimum Wage * 01/01/81 $3.35 * 04/01/90 $3.80 * 04/01/91 $4.25 * 10/01/96 $4.75 * 09/01/97 $5.15 Some links: * http://www.boli.state.or.us/technical/min-wage.html - link of above facts * http://www.fedminwage.com/ --User:Tomruen 08:21, 10 May 2004 (UTC) ---- Arguments for/against a :Minimum Wage increase: For: * It helps people that make the least money. -- How ? * It helps union workers because many union contracts are based on a fixed percentage/dollar amount over minimum wage. Indirectly helps union funds used for to pay union officials, retirement plans, and for lobbying political issues (such as an increase in the minimum wage) because union dues are a percentage of the hourly wage. Against: * It increases the cost of basic goods and services in proportion to the increase in labor costs from an increase in the minimum wage. It is claimed to offset any increase minimum wage workers receive. * Minimum wage workers usually earn minimum wage only for a short period of time and move to higher paying jobs. * Many minimum wage jobs are performed by part time workers and students. * It harms the people who make the least money -- a minimum wage law doesn't create any jobs, it simply outlaws some jobs (those which create little value). ---- There have to be some real reasons to be for or against an increase in the minimum wage. Not some generic 'it helps the little guy' or some generic 'it costs jobs' Can anyone list all off the things that are directly tied to the minimum wage level? * Social Security (United States) taxes paid (6.25 percent paid by wage earner and 6.25 percent paid by employer) * :Medicare taxes paid (1.2 percent paid by wage earner and 1.2 percent paid by employer) * Union contracts based on a fixed percentage/dollar amount over minimum wage * Unemployment taxes ?? * Worker's compensation insurance ?? ---- Basically, the economic effects very much depend on the relevent supply and demand curves and monopoly or monopsony effects. Ignoring monopoly and monopsony effects, an increase in minimum wage will increase the amount of the wage (duh) and decrease the amount of labor demanded. This will result in a surplus of labor and cause a dead weight loss. On the other hand, if the employer is a monopsony in the labor market, (or at least has significant monopsony power), then sometimes both the wage and the amount of labor hired will increase. If the sellers of labor have a monopoly (i.e. maybe there is a strong union) then they may demand some kind of increased wage and this will increase the amount of money that the members take home, even if somewhat less labor is employed. ---- Clearly, there is some informed discussion guiding the creation of this article. However, the poor grammar in the Further economic issues section in the version of 29 October 2003 makes it unintelligible. The article needs a rewrite so that the rest of us can understand it. User:Rossami 02:10, 30 Oct 2003 (UTC) == Card-Krueger Experiments == I just made some major revisions to the part of the article that deals with the Card-Krueger experiments, as it made no mention of the serious objections made to their methodology and conclusions. I was wondering if it might ultimately be better to put everything regarding C-K in a new section or perhaps an entirely separate article. User:Kmweber 23:04, 28 Aug 2004 (UTC) I would like it if you made it into a seperate article. I noticed you took more care to NPOV the pro C-K paragraphs than the con C-K paragraphs. --User:LegCircus 23:10, Aug 28, 2004 (UTC) The problem with saying "Some subsequent attempts..." is that it implies that attempts were made to verify C-K that agreed with the original findings. As there are no known instances of this, the leading "Some" is incorrect. : Weber cut the possible theoretical explanations of why C-K may be right. That is totally unjustified, so I'm putting them back. No matter what one thinks of this literature, C-K have made a major step in pushing economists away from a dogmatic and _a priori_ approach to the minimum wage question. BTW, it's been known for quite awhile that the data indicating a negative employment effect due to the minimum wage is very shaky (showing low statistical significance). User:Jdevine 16:51, 29 Aug 2004 (UTC) == EPI == I'm not sure how relevant this is, and perhaps it is ad hominem, but the link provided that further supports the Card-Krueger experiments was put out by the Economic Policy Institute. A substantial number of EPI's board of directors are affiliated with the AFL-CIO in some way or another.[http://www.epinet.org/content.cfm/board link]. Union members benefit greatly from the minimum wage since A.) It eliminates low-income labor alternatives that compete directly with union members, B.) Many union wages are a function of the minimum wage as deliniated in the contracts. Since most of the board of directors are on the AFL-CIO's payroll, would this mean that EPI's findings shouldn't be considered objective since there is such a vested financial interest involved? == Minimum wage and unemplyment == If there were no minimum wage, there would be no unemplyment. Get rid of the minimum wage, and the unemployment problem is solved.--User:Jerryseinfeld 02:28, 9 Jan 2005 (UTC) :Not true. While I agree that the minimum wage does contribute to unemployment, other barriers still exist. Full employment would only be possible in a world of cost-less mobility and perfect information, where employer and employee would be able to meet instantly and without cost. --User:4.14.71.241 05:52, 9 Jan 2005 (UTC) :Yeah, the problem with all those unemployed people is that they're dying to work for less than minimum wage but the government won't let them, and they haven't heard of the black economy... User:Rd232 11:13, 9 Jan 2005 (UTC) :Actually with a genereous welfare system even the lack of a minimum wage would not guarantee an end to unemployment. So long as marginal workers have alternate income options then the benefit of exchanging their time for low wages may still be outweighed by the cost. TERJE 2005-01-10. == Minimum wage in Finland == Sorry, but seems like your sources really don't understand the complex systems we have in scandinavian countries. I do believe the finnish version of wikipedia with lots of local experts checking the article a bit more trustworthy than the US state bureau. Pls see [http://193.209.217.5/in/internet/suomi/suomi.nsf/NET/120202142400EH] [http://virtuoosi.pkky.fi/vilma/tyoelama/sopimus.htm] [http://www.finlex.fi/fi/laki/ajantasa/haku.php?search%5Btype%5D=pika&search%5Bpika%5D=ty%C3%B6*&submit=Hae] -- User:Tmh 12:08, 8 Mar 2005 (UTC)
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