Last year (2012), there was this one specific issue
that always managed to catch my interest, as it was inevitable. It was on the
newspapers, it was a hot topic for debates and probably one of the most talked
about topic of discussion. This is actually my personal favourite topic as well;
‘minimum wage’. Why I say that it was a hot topic was because President Barack
Obama had said that he was going to implement a rise in the federal minimum
wage. This immediately sparked up many heated debates as there were many people
supporting and going against that idea. Personally I feel that having a higher
minimum wage in a country would help more people and increase the spending
power of the people, which in return is used back in the economy. Minimum wage
can be defined as the amount of compensation an employee must receive for
performing labour (Investopedia).In my point of view there should be a reasonable minimum wage set in every country. A study conducted by International Monetary Fund (IMF) for Hong Kong, states that when a minimum wage is introduced, it is estimated to increase the impulsiveness of production over the business cycle by 0.2 percent to 9.2 percent, and of employment by −1.2 percent to 7.8 percent (Hong Kong. International Monetary Fund, 2008). I personally feel that having a higher minimum wage in countries like the United Sates and Malaysia would be a positive thing because this gives the people more purchasing power, thus leading to a higher spending power which can than be used back in the economy. This would then increase the economic growth of the country.
Now what happens when there is no minimum wage in a country? Lets take Germany for an example. Germany does not have a national minimum wage even though specific industrial sectors have one. According to the DGB, based on legally employed workers,there are now 1.4 million receiving less than €4 (£3.23) per hour, 1 million are on short-term contracts and 7 million are so-called mini-jobbers, earning €400 per month £323) and 70% of them have no other job (Palmer 2010). Doesn’t this make the lifestyle in Germany low? Although Germany might be getting richer this statistics I feel show that the average German is getting poorer. On the other hand what if Germany actually had a minimum wage and that too at a very good standard, this might motivate the workers and also increase competitiveness. They would have a stronger incentive to work for and might even increase the productivity level of their work. Not only that, but the chances of the labours getting exploited might also decline with the presence of minimum wage.
Then, there are countries that implement minimum wages, but somehow is not enough or satisfy the people. That’s why countries like The United States of America and Malaysia were planning on increasing the minimum wage. President Obama proposed the idea of increasing the national minimum wage from $7.25 an hour to $9 an hour. Minimum wage is the floor price set by the government to pay the labourers. When there is a high minimum wage more people would move away from the poverty line as the income of a person increases. This would mean that the country would have a lower poverty level and most likely higher middle class people.
I feel that President Obama’s suggestion also
had influenced the leaders of Malaysia to increase the minimum wage.
Malaysian leaders have also implemented a higher minimum wage as well ; RM 900 for Peninsular Malaysia and RM 800 for Sabah and Sarawak (Malaysian Digest, 2012). Implementing a higher minimum wage in Malaysia would make a huge
difference. Malaysia had a poverty line of 3.9% based on the World Bank in
2009, and with the implemented regulation this number can be even more reduced.
Increasing the minimum wage means the floor price is increased, meaning a
higher incentive is paid and thus increasing the lifestyle and spending power
of the people.
On the other hand there are also an equal
number of people who are against increasing minimum wage. People worry that
increasing the minimum wage would increase unemployment due to the supply and
demand principle.
A team of economists, led by Arindrajit Dube of the
University of Massachusetts-Amherst, compared employment levels in contiguous
areas with disparate minimum-wage levels over a 16-year period and concluded in a 2010 paper there are “strong earnings effects and
no employment effects of minimum wage increases.”(Bloomberg, 2012). There are
ways to overcome the problems faced as people can learn to adapt to these
changes and work towards living a higher lifestyle.
Then there are people worried that those who would benefit
from this are those who are already doing well or part time workers, but the statistics prove otherwise.
‘A study published last summer found that
nearly nine of 10 workers who would benefit from an increased minimum wage were at least
20 years old. More than half of them worked full time, over a third were
married, and more than a quarter were parents’ (Hernandez, 2013).
This study shows that yes the ones who are
going to be benefited tremendously might be the part time workers or those just above 20 years
old, but nevertheless some of them are already starting a family and are ready
to settle down. They now also have carried the responsibility of raising their
family as well, so how can they just be ignored? Isn’t it a good thing that
these people benefit as well?
In a discussion on CNN (http://edition.CNN.com/2013/02/24/opinion/greene-minimum-wage)early this year, there was this one issue which was brought up regarding
increasing the minimum wage; does increasing the minimum wage create good
middle class job or does it become a distraction of not creating a good middle
class job? I find this a very interesting point to be thought about.
Towards the end of the video the writer from Economist states that she feels
that having a high minimum wage is a good thing until a certain extent (minimum
wage is not set too high). When increasing the minimum wage in the country, the government should consider every side, and not see the level minimum wage too high. Having an increase in minimum wage should be a win-win situation for all parties. I would also like to point out that I believe that
the job turnover rate would be much more lower as the labourers/workers would be
happy that they are able to grow as well.
In reality minimum wage brings in a lot of
benefit. In today’s world I feel that the rich are getting richer and the poor
and getting poorer. How are we supposed to achieve a global prosperity in this
kind of situation?
Investopedia, Minimum
Wage.
Available from: http://www.investopedia.com/terms/m/minimum_wage.asp
[Accessed: 7th June]
Hong Kong. International Monetary Fund, Asia and Pacific
Department (2008) The Impact of Introducing
a Minimum Wage on Business Cycle Volatility: A Structural Analysis for Hong
Kong SAR.
Available from: http://www.imf.org/external/pubs/ft/wp/2008/wp08285.pdf
[Accessed :7th June]
Palmer,J.(2010)The real cost of German labor reforms. The Guardian[online].26th
October.
Available from: http://www.guardian.co.uk/money/2012/oct/26/real-cost-labour-reforms-germany
[Accessed 5th June 2013]
World Bank (2009)
World Development Indicators.
Available from: http://data.worldbank.org/country/malaysia
[Accessed 6th June 2013]
Bloomberg (2012) Raise
the Minimum Wage [online] . 16th April.
Available from: http://www.bloomberg.com/news/2012-04-16/u-s-minimum-wage-lower-than-in-lbj-era-needs-a-raise.html
[Accessed 5th June]
Townhall Finance(2013) The Deadweight Loss of Minimum Wage Hikes. Available from: http://finance.townhall.com/columnists/politicalcalculations/2013/03/03/the- deadweight-loss-of-minimum-wage-hikes-n1524753/page/full/ [Accessed 6th June]
Hernandez,S. (2013) How
would raising the minimum wage affect the economy?. The Week [online]. 21st February.
Available from: http://theweek.com/article/index/240460/how-will-raising-the-minimum-wage-affect-the-economy
[Accessed 5th June]
