RedStarOverChina
3rd February 2005, 00:27
This is my essay for economics class, tho it does involve politics. Please give me ur opinion regarding the issue. And ignore the technical stuff.
On February 1 of 2005, the minimum wage here in Ontario was being raised to $7.45 per hour. This event naturally brought up the debate about the benefits and disadvantages of minimum wage, which had already been going on for more than a century.
The encyclopedia defines minimum wage as following: “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.” We can easily perceive it as a policy that undermines a free market, in other words, a capitalist economy. And it does.
First suggested by socialists, it was introduced into Canada in 1918, in B.C. and Manitoba. Employers and enterprenuers have moaned and grumbled about it ever since, because of an obvious reason: they feared they might lose their impressive profit to the workers. Without such measurements, the employers could get away with paying their workers next to nothing, especially when the market is backed by an excessively large workforce. The employers complained violently, as minimum wage got higher and higher; and their trade of exploiting people got less and less lucrative.
Somehow, they found out that the government, for once, was not standing behind them to back them up on the issue of minimum wage. It’s not that the political parties were no longer interested in the bribes from businessmen. However, they were also planning to please the masses in order to get elected, so they could enjoy more bribes from large companies. But even without all the cynicism, we can understand why democratic governments today like the idea of minimum wages.
The general population liked the concept of minimum wage. It does a number of good things other than raising people’s wages and increasing their standard of living. It decreases lower-income group’s dependency on government relief programs, and discourages labor-intensive jobs, in favor of better-paid jobs that require less physical labor. It also encourages people to receive more training to get better jobs, as people are able to pursue a better education with the money they earned from their current jobs.
Traditionally, it is believed that minimum wage has a negative effect on overall employment. However, according to the research done by economists David Card and Alan Krueger, “the negative employment effects of minimum-wage laws are to be minimal if not non-existent.” That is because, while minimum wage discourages harsh physical labor, it helps the society to create jobs that require better education. As the minimum wages increase, the consumer demand for products also increases, because of the strangthened financial ability of the workers. That, of course offers more job opportunities.
Theoretically speaking, enforcing a minimum wage policy, which can be demonstrated by placing the bottom line price above the market eqilibrium in an suply and demand diagram, automatically and artificially creates an surplus in the supply of workers; meaning many would lose their jobs. But in practice, those who lose their job will have new career opportunities since those who keep their jobs are making more than they used to, thus are willing to buy more products and services.
The Kaynesian economists, who had been the dominating group of economists since the beginning of WWII, emphasized the flow of currency instead of the accumulation of capital. Their belief that a healthy and strong flow of currency benefits the society, seem to be correct.
The best way to ensure this healthy rotation of money is to distribute the wealth more equally among the people, instead of handing them over to the few who are very likely to accumulate their wealth. The minimum wage policy does just the right thing for the economy by enriching the pockets of the majority.
On February 1 of 2005, the minimum wage here in Ontario was being raised to $7.45 per hour. This event naturally brought up the debate about the benefits and disadvantages of minimum wage, which had already been going on for more than a century.
The encyclopedia defines minimum wage as following: “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.” We can easily perceive it as a policy that undermines a free market, in other words, a capitalist economy. And it does.
First suggested by socialists, it was introduced into Canada in 1918, in B.C. and Manitoba. Employers and enterprenuers have moaned and grumbled about it ever since, because of an obvious reason: they feared they might lose their impressive profit to the workers. Without such measurements, the employers could get away with paying their workers next to nothing, especially when the market is backed by an excessively large workforce. The employers complained violently, as minimum wage got higher and higher; and their trade of exploiting people got less and less lucrative.
Somehow, they found out that the government, for once, was not standing behind them to back them up on the issue of minimum wage. It’s not that the political parties were no longer interested in the bribes from businessmen. However, they were also planning to please the masses in order to get elected, so they could enjoy more bribes from large companies. But even without all the cynicism, we can understand why democratic governments today like the idea of minimum wages.
The general population liked the concept of minimum wage. It does a number of good things other than raising people’s wages and increasing their standard of living. It decreases lower-income group’s dependency on government relief programs, and discourages labor-intensive jobs, in favor of better-paid jobs that require less physical labor. It also encourages people to receive more training to get better jobs, as people are able to pursue a better education with the money they earned from their current jobs.
Traditionally, it is believed that minimum wage has a negative effect on overall employment. However, according to the research done by economists David Card and Alan Krueger, “the negative employment effects of minimum-wage laws are to be minimal if not non-existent.” That is because, while minimum wage discourages harsh physical labor, it helps the society to create jobs that require better education. As the minimum wages increase, the consumer demand for products also increases, because of the strangthened financial ability of the workers. That, of course offers more job opportunities.
Theoretically speaking, enforcing a minimum wage policy, which can be demonstrated by placing the bottom line price above the market eqilibrium in an suply and demand diagram, automatically and artificially creates an surplus in the supply of workers; meaning many would lose their jobs. But in practice, those who lose their job will have new career opportunities since those who keep their jobs are making more than they used to, thus are willing to buy more products and services.
The Kaynesian economists, who had been the dominating group of economists since the beginning of WWII, emphasized the flow of currency instead of the accumulation of capital. Their belief that a healthy and strong flow of currency benefits the society, seem to be correct.
The best way to ensure this healthy rotation of money is to distribute the wealth more equally among the people, instead of handing them over to the few who are very likely to accumulate their wealth. The minimum wage policy does just the right thing for the economy by enriching the pockets of the majority.