Definition In Economics Essay Sample

Minimum wage and economics

Minimum wage in simple terms is the least amount of money a worker is supposed to earn. The government set up a minimum wage in the year 1938. The Fair Labor Standards Act of 1938 was put in place to ensure employees are protected from unfair remuneration policies by employers. This was a very important move by the government in several ways. This essay will extensively explore a few of those reasons which are very important.

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First of all one needs to understand that the minimum wage has to be as fair as possible to both employers and employees. It should be sustainable and realistic. This is because, if the minimum wage is set so high, most employers will have to lay off some of the employees in order to ensure employee salaries do not eat into the profits. This means for the business to continue running, a few people have to be rendered jobless. A high minimum wage is likely to increase the rate of unemployment (Richardson, 2016).

Second minimum wage ought to be able to sustain employees with all their basic needs. Paying employees very little only means they cannot afford basic needs and thus need other jobs to supplement their income. The current labor market is not flooded with jobs rather job seekers. In this case, the government intervenes to ensure there is a balance and every employee is able to sustain themselves. One may wonder why this is important. It is not just important to citizens but to the economy as a whole. If citizens cannot afford what they need, this means the various commodities produced by the different industries will lack buyers. This threatens the economy since the domestic market is very important (Dixon, 2017).

Another importance of setting a minimum wage is low turnover (Dixon, 2017). When employees are sure of getting paid well enough for their services, they are motivated. In this case, they are bound to work even harder thus increasing productivity. This means improved quality of goods and service and low rates of employees taking industrial action.

Conclusion

As discussed above, there should be less politics when dealing with matters minimum wage. As (Dixon, 2017) observes, a lot of politicians bring in personal interests when motions about minimum wage are tabled. This is to further individual interests rather than considering the economic impact of setting a low minimum wage. A good minimum wage basically helps distribute resources equally. It ensures that all people have a purchasing power and prevents a group of people from getting richer as others become poorer. It is thus essential in reducing the poverty levels. The Fair Labor Standards Act of 1938 was one of the broadest moves by the government towards fighting for even the least of citizens.

References

Dixon, L. (2017). How Does Minimum Wage Impact Economy?. Accessed January 25, 2018 from http://www.talenteconomy.io/2017/06/14/minimum-wage-impact-economy/

Richardson, O. (2016). The Economic Effects of Minimum Wage. Accessed January 25, 2018 from http://smallbusiness.chron.com/economic-effects-minimum-wage-2690.html