Based
on the article “Minimum Wages, Immigration Control, and Agricultural Labor
Supply” which posted in http://ajae.oxfordjournals.org/content/94/2/464.extract, it has declared that the increases of U.S minimum wages had made a few
impact on its economic labor market.
Economists have so far been overlooked to the process
leading to setting of minimum wage. There are two common ways of setting a
country minimum wage, which is either government authorized or the collective
bargaining agreements product that is extended generally applicable to all the
workers. A price floor is a rule that makes something illegal to sell at a
price lower than a specific level. Relatively, when a price floor is applied to
labor markets, it is called minimum wage or pay floor. For example a firm that
hiring less-skilled worker should set a minimum wage for those workers to make
sure they get enough and fair payment. The markets are most works with minimum
wage as the government had set the regulation, but does it really work in all
the markets? In economy theory, minimum wage brings unemployment because if the
minimum wage is set above the equilibrium wage rate, the quantity of labor
supplied by workers will exceeds the quantity demanded by employers. In this
situation, there will be surplus of labor in the market because the legal wage
rate cannot eliminate the surplus, the minimum wage creates unemployment. To
strengthen this argument, we will apply this theory into reality market.
In the early 1930s, the United
States has had a Federal minimum wage. That wage has limits within 30 and 50
percent of the average wage paid to engineering workers. The amount paid was
$6.55 and it’s issued in July 2008, in July 2009, the amount paid was $7.25. The
majority states there’s however, have minimum wages that are higher than the
Federal minimum wage. Several states have the higher minimum wage rate. For
example, in 2008 the minimum wage in Washington was $8.07 an hour. Some of the
firm executive indicated that the purpose of this minimum wage rate it to help
the less-skilled worker to escape from poverty as we have discuss earlier.
However, the minimum wage has the
capacity to effects the rate of unemployment. When the minimum wage rate is
higher than the equilibrium minimum wage, some employers will be forced to hire
fewer workers which caused the labor demand curve to slope downwards. When the
minimum wage rate is high, employers are not willing to hire more workers
because the more workers they have, salary to be paid will be more. Employers
do not wants to spend so much on labor as there are still many part of the firm
to cover. When this happens, many people will not get a job and it causes the
unemployment rate to increase. An author of economics books also pointed out
that higher minimum wage may causes some firms out of business. Then some of
the low-income workers may find themselves out of work. At this point,
employers will fire those people and next they become unemployed. Critics indicated that a man who is unemployed
and desperate to find a job at a minimum wage of $6.55 per hour is clearly
worse off than he or she would be if he is being employed at a market wage rate
of; let’s say $6.10 per hour.
“To examine
that sensitivity, we explain the supply of labor in Oregon nurseries, focusing
on minimum-wage structure and border control efforts and using a 1991–2008
quarterly wage panel in a simultaneous equations framework. We find labor
supply to be highly elastic or—what is the same—rather inflexible: a 10% boost
in work hours demanded induces less than a 2% rise in the demanded wage rate.
Despite that inflexibility, nursery wage rates are sensitive to minimum-wage
policy. A 10% rise in the Oregon minimum wage lifts nursery wages by around
4%.” Above is the research done by few authors within the employment market in
United States. This research has shown the minimum wage has a highly
wage-compressing effect.
Some researchers somehow determine that the minimum wage increases will not
causes the rises of unemployment. Instead, with a higher minimum wage rate, a
firm may contributes more productive works for the workers to keep them
occupied and make sure the work are profitable. Moreover, if the market is
competitive, the higher minimum wage rate may force firm to produce more
productive tasks for the on-hired workers, it could also raise the firm’s
productivity. Another way of saying, the minimum wage causes fewer workers to
resign voluntarily. Therefore, the lesser low-productivity workers would raise
the average productivity of the firm’s worker. In either case, the saying of
minimum wage affects employment rate would be a fraud statement.
There is evidence to prove the both statements whereby the minimum would or
would not affect the employment rate. The first was in 1980s. the evidence
suggested that the raise of minimum wage in 1980s had cut down the employment
rate of minimum-wage workers and most of them are teenagers which is between 16
to 19 years old. The statement was that about 1 to 3 percent of teenager
employment reduced due to a 10 percent increases in minimum wage. As time goes
by, in the 1990s, the rises of minimum wage had causes a smaller unemployment
rate among teenagers. “It is possible that the more current minimum wage raises
merely joined the sort of wage increase that would have occurred in any task in
competitive low-wage labor market. Negative employment effects of minimum wages
occur only when such minimum are above equilibrium wages.”
In
overall, the effects of minimum wage increases are not certain. In certain time
the rises of minimum wage may low down the employment rate but sometimes not.
It is to be depends on how a firm conducts its worker with the changing of
minimum wage rate.
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