Minimum wage and its effect on employment

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Introduction: The relation between employment and minimum wage is one of the most debated topics in economics. The debate on minimum wage has been going on ever since it was first implemented in New Zeland in 1894 and Austrian colony of Victoria in 1896 (Starr, Gerald 1993). Although minimum wages has been implemented in most countries there is still heated debates about the benefits and drawbacks of minimum wage. Numerous studies have been conducted in the USA on the relation between minimum wage and employment, and many show contradictory results. While initial reports found a correlation between unemployment and minimum wage, subsequent studies have show no proven relationship. This report focuses on the findings of these later studies . Minimum Wage: The Merriam-Webster dictionary has defined minimum wage as “an amount of money that is the least amount per hour that the workers must be paid according to the law”. Supporters of minimum wage say that it boosts morale of workers, improves their standard of living and reduces inequality and poverty. Opponents of minimum wage claim that minimum wages increases unemployment in low-skilled workers and increases the cost of companies, forcing them to raise prices making their exports uncompetitive. The minimum wage law is implemented in almost 90% of the countries in the world.(ILO, 2006) The minimum wage is different in different countries and in certain countries there are even different minimum wages in different states of the same country. Most European nations have minimum-wage laws as well; some, such as France and the United Kingdom, have significantly higher minimums than the United States. In the USA, the federal minimum wage set by the Department of Labour at $7.25 per h... ... middle of paper ... ...rsey and Pennsylvania." American Economic Review, vol. 48, no. 4, pp. 772-793. 3) Eccles, Mary and Richard B. Freeman. 1982. “What! Another Minimum Wage Study.” National Bureau Of Economic Research 4) Mankiw, Gregory (2011) Priciples Of Microeconomics sixth edition , South-Western Cengage Learning p118 5) Minimum wage, IGM Economics Expert Panel 2013 Retrieved on 9th February 2014 from : http://www.igmchicago.org/igm-economic-experts-panel/poll-results?SurveyID=SV_br0IEq5a9E77NMV 6) "Minimum Wage." Merriam-Webster.com. Merriam-Webster, Retrieved on 9th February 2014 from http://www.merriam-webster.com/dictionary/minimum wage 7) International Labour Organization 2006 : Minimum wage policy 8) Starr, Gerald, 1993. Minimum wage fixing : an international review of practices and problems (2nd impression (with corrections) ed.). Geneva: International Labour Office. p. 1

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