Minimum Wage Laws Effects On Employment And Unemployment Research Paper Samples

The labor market is constituted by the employers and employees. The two distinct categories of people ensure that the goals set in any organization are achieved and accomplished. The minimum wage laws in any state categorically state the lowest amount of wage that a person can be paid for a stipulated amount of time when he or she is engaged in useful employment. The canons depict the minimum amount of wages per hour that are payable to any stipulated group of workers. In the United States, the Act has been enacted to ensure that the minimum wages set are enforced and applied in any useful employment.
The Fair Labor Standards Act is answerable for minimum wages control. The minimum wages payable to any individual have gradually increased from $.25 to $5.15 from 1938 to 1997. The origin of the minimum wages dates back to Australia and New Zealand. The two were the first countries to enact the law. The minimum wage was to act as a guarantee that the unskilled workers engaged in any activity have a predetermined amount that will allow them have a decent life. Non-economists believe that the laws that enact a minimum wage have a critical impact on the workers. They believe that the wage reduces exploitation and assists in poverty reduction. This belief contrasts sharply with that of economists. Economists’ belief that the laws setting the minimum wage lead to hardships that can be avoided on the very people they should protect. Some of the outcomes of the minimum wages on the labor market is the minimum wage laws do not guarantee jobs.
When economists want to comprehend the effects of wage policies that the government of the day has put in place, the variables that include prices and wages are used to analyze the effect. Therefore, to analyze the effects of the minimum wages law on the workers of America, equations are set to predict the movement of wages and prices. This assists the economists to make the correct decision. Moreover, slightly over 20.8% of all workers who earn the minimum wage are spouses or family heads who devote all their time to work. 30.8% are children and the young Americans who have been enrolled to institutions constitute 32.2%. Most of the minimum wage workers reside with relatives with earnings that are higher than the poverty level.
Employers, find it very hard to employ persons in their firms whose output is lower than the minimum wage payable. Most firms and employers will, therefore, employ less to keep up with the new regulations. This has a direct impact on the labor market as there is a reduction in general employment. Another effect of the minimum wage levels to the labor market is that these laws reduce employment. Many leading economists explain that a level that is set too high will be detrimental to the youth who are seeking employment. This will be accelerated by the reality that even without any particular skills, an individual is guaranteed to a certain amount of money regardless of whether he reaches the level of production or not.
Another outcome that the labor market realizes, as a result, of minimum wage laws is harming the way workers are compensated. If the review is reviewed upwards, and there is no corresponding increase in the economic conditions of the company or employer, the employer may review the benefits. These benefits include vacations, insurance and on-the-job training. The benefits may be reduced to accommodate the increase in the minimum wage level. This will be detrimental to the employee as a reduction in the fringe benefits coupled with an increase in the salary produces a nil effect in the overall salary structure of the employee. This effect on the labor market is not desired and is mostly caused by minimum wage laws.
The labor market is affected by both demand and supply. An increase in the wage rate affects both the demand and supply. If the minimum wage rate is situated at a very high level, the demand of labor in the market decreases. Labor supply in the labor market increases when a high minimum wage level is set. This is because many people are willing to take up jobs with the high prices. These are some of the outcomes that the minimum wage has on the labor markets.
The minimum wage has a brunt on the employment and unemployment levels in any given nation. On the employment, research on their economic benefit has shown that the minimum wage kills and reduces the number of job opportunities for the people with low skills and the minority. The youth is also affected by the minimum wage. This reduces the level of employment in the nation. More practically, if the minimum wage level in the country is raised, businesses and corporations are required to make the necessary adjustments to accommodate the new terms and conditions of pay. In an effort to do that, the company reduces its hiring activities and requirements. This leads to reduced levels of employment and increases unemployment.
Therefore, it would be appropriate for any economist to conclude that the minimum wage laws imposed by the government to employers end up creating fewer employment opportunities for the already unemployed people living in the nation. Moreover, the youth is the group that is most affected when employment and unemployment is concerned. In many nations across the world, the teen forms a large part of the population. The teen does not have all the obligatory dexterity that is crucial for an individual to get employment in a position that requires skilled labor. Therefore, if there is an increase in the minimum wage level, organizations become more reluctant in engaging unskilled labor in their businesses. This renders most of the youth jobless as they do not possess the required skills. In addition, during the seasons of economic recessions firms cannot support the labor they have employment. If the minimum wage rate is imposed, many low wage workers remain unemployed as the business fears it may not meet all of its obligations.
The historical data and information available in the commissions and authorities that deal with labor issues and markets indicate that minimum wages have a negative effect on employment.
Any increase in the minimum wages indicates a fall in the employment opportunities that are available to the workers of the nation under scrutiny. In the diagram below, the equilibrium hourly real wage rate is $4. However, the government has pegged the minimum wage rate at $5. At the rate of $5, the supply of labor in the market is 50,000. However, the amount of labor that the businesses need and that is needed in the whole market is 32,000. This means that, the amount of populace who are disposed of to accept work at the minimum level of $5 supersede the actual number of people that the firms and businesses would accept in the market. The excess supply in the market is what is termed to as unemployment.
Unions that are formed by employees to represent their grievances and assist them in airing their views and needs to their employers also represent the workers in negotiating for better pay and a raise in the minimum wages. Although an increase in the level of minimum wage impacts negatively on employment, it is within the powers of the unions to negotiate for a raise in the minimum wages. It is in this fortitude, therefore, that the relationship is developed between employment, unemployment and efficient wages with the unions. Those unions that represent the unskilled workers have an obligation to advocate for a raise in the minimum wages of their members. This benefits the union in that despite some losing their jobs, those who remain in active employment enjoy the benefits and an increase in their salary, as well as terminal benefits.
Moreover, dismissal of those who lose their jobs is not done on empty hands. Their benefits and terminal emoluments are calculated under the new terms and, this increases their benefits. Furthermore, unions are able to bargain on behalf of their members for shorter unemployment periods. In the occurrence of economic recessions that negatively affect the earnings of the companies and firms that employ unskilled labor, most of the low income earners are laid off. This bracket is constituted mostly by unskilled laborers who form the unions. In such an occurrence, the unions are in a position to negotiate for shorter unemployment periods that are favorable to the members and the companies, as well. Unions, therefore, play a major role in ensuring that the employment and unemployment levels are controlled within the firms that their members work in.
Other effects of the minimum wage in the economy and job relations include employers cutting on budgets that should cater for employee training and raising the job turnover. More people leave their jobs to search for others. Minimum wages reduce part-time workers and increases the likelihood of employers hiring illegal aliens.
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