Critically Discuss the Cause and Consequences of Minimum Wage on the Labor Market

Critically discuss the cause and consequences of minimum wage on the labor market

Contents 1. Introduction 2. Definitions of minimum wage 3. Phenomenon 4. Problem areas & sources 5. Overview of the minimum wage situation in Pros and Cons 6. Recommendation 7. Conclusion 8. Bibliography

1. Introduction

The statutory minimum wage by May 1, 2011, the first level of the statutory minimum wage is set at $ 28 per hour. Provisional Minimum Wage Commission (Temporary Commission) to conduct the consultation period, the business community related organizations pointed out, they are not raised to the level of the statutory minimum wage should the wages of low-paid employees, and even more high-level, and also that they might have to raise revenue in the legal employee wages above the minimum wage level, in order to maintain the morale of the employees and not the gap between the wages of the same rank. Many working class of this chain effect is expected to narrow pay gap between all levels of industry and enterprises more significant. Frequently cited by examples of relevant organizations, including large and medium-sized restaurants and retail shops. The Legislative Council has passed the statutory minimum wage of subsidiary legislation. From May 1, 2013, the statutory minimum wage levels will be adjusted to 30 Hong Kong dollars per hour. The maximum amount of the number of records on the employer to keep the employee 's total work increased from May 1, 2013, amendments to $ 12,300 a month.

2. Definition of minimum wage

The definition of wages for SMW is aligned closely with that under the Employment Ordinance. Unless otherwise specified, wages in the employment Ordinance means all remuneration, earnings. Allowances including travelling allowances, attendance allowances, commission, overtime pay, tips and service charges, however designated or calculated, capable of being expressed in terms of money, payable to an employee in respect of work done or to be done, subject to certain exclusions.
Due to the calculation time is working time not include the minimum wage paid to the employee at any time, not working hours (for example, rest day pay, holiday pay, annual leave pay, maternity leave pay, sickness allowance, etc.) must not number as calculating the minimum wage part of the wages paid to employees. Minimum Wage Ordinance also listed some other payments should be counted as aspects, in order to determine whether the wages of the wage period in comply with the minimum wage paid. Whether neither minimum wage regulations, nor the Employment Ordinance prescribed in meal time and days of rest should be paid. Meal breaks and rest days whether paid or in other ways agreed between employers and employees. Whether meal breaks working hours and / or paid rest days if there wages, wage period, wage calculations, extrapolated and payment the organization of commission, in calculating the minimum wage.
Under the Employment Ordinance, an employer should not unilaterally introduces any change terms and conditions of employment of employees, in order to solve their problems, and to reach a consensus.

3. Phenomenon Australia earlier than the establishment of a minimum wage system in 1907 is a pioneer in this regard. The current minimum wage from July 1, 2012, the minimum wage weekly earnings A $ 606.40 hourly wage of A $ 15.96. (1 Australian dollar = 1.04 U.S. dollars to the average exchange rate for August 2012 to September, approximately weekly earnings of $ 630 at an hourly rate of $ 16.6.)
Reference,http://www.fairwork.gov.au/media-centre/latest-news/2012/06/Pages/20120601-2012-minimum-wage-decision-released.aspx
The minimum wage in most EU countries are after-tax monthly salary in the form of (crude) defines, the United Kingdom and Ireland by hours of formal definitions. 27 EU countries, 20 countries have established a statutory minimum wage, such as: the lowest in Bulgaria (148 euros / month), Luxembourg (1801 euros / month). Some countries required by the local trade unions, industry associations. In United Kingdom, British low-paid Committee published in 2006 research report (Reference, Denvir, A. and Loukas G., 2006. The Impact of the National Minimum Wage: Pay Differentials and Workplace Change. )display, from the employer to collect the minimum wage with the coming of the related capital data is feasible., Such as the UK real conduct a national minimum wage, did not see "high-paying family" requirements with low-paid employees to maintain the original pay gap; contrary, above the level of the minimum wage "paid family income increases, the actual compared with less than the minimum wage level of low-wage family", the chain reaction triggered a raise minimum wage is relatively minor.

Basic wage system in Taiwan, the basic wage by the Council of Labor Affairs Commission each year in the third quarter, the implementation of the discussion, and handed over to the Executive Yuan for approval and announcement and implementation. The current basic wage was implemented on January 1, 2013, a monthly salary of 18,780 Taiwan dollars (about US648), the hourly wage of 109 Taiwan dollars (about US3.76). And the formulation of laws, regulations wages must be agreed by both employers and employees. But shall not be less than the basic wage. (Reference, Labor Standards Act 21, Laws & Regulations Database of the Republic of China). On the other hand, Japan based on each prefecture 's economic development, and different industries situation, for a minimum wage, about a year around October to adjust, the latest adjustment implemented in October 2012, the minimum wage for each prefecture under the hourly wage of between 652-850 yen. In addition, a higher degree of technology industries such as steel-making industry, mechanical industry, as otherwise provided higher minimum wage (about 800 yen per hour, about $ 10.1).
Japan government also formulation of laws, determine the workers ' agreement, whether it is the employer 's wages below the minimum wage amount is tentative, it is invalid under the law, should be agreed upon amount equal to the minimum wage. Therefore, if you do not pay wages below the minimum wage standards, penalties (fines up to 500,000 yen) in the definition of the minimum wage law, if you do not pay the wages of more than the minimum wage in the region do not pay wages higher than the minimum wage (by industry) specific in this case, the punishment (a fine of not more than 30 million yen) to establish a "labor Standards Law. (Reference Law "(April 15, 1959, No. 137) Minimum Wage Law" (excerpt) 4 (1)) Minimum wages, the employer shall pay the amount below the minimum wage.

4. Problem areas & sources Implementation of the statutory minimum wage in better macro economic circumstances will help relieve the pressure caused by the slow employment and corporate profits, and to encourage more people to enter the labor market. Conversely, if the economy is poor implementation of the statutory minimum wage impact on the business environment will become more obvious to me, labor demand will also decline
First, the impact on employees: The data show that after adjusting for inflation, the wages of low-wage employees have considerable growth in real terms; the statutory minimum wage will help improve the quality of life of employees in the grassroots. But the different ranks and trades wage gap narrowed face recruitment difficulties lead to some of the less favorable working environment industry, employers generally have to be jointly and severally raised wages have reached the legal level of remuneration of employees to retain talent. Related study found that zero. Retail trade and catering to some extent by the knock-on effects, but the data also show that enterprises in the implementation of the statutory minimum wage has not slashed employee benefits to offset the increase in labor costs. Second is the impact of the enterprise: the implementation of the statutory minimum wage level pulled down the cost of remuneration, in particular, even in low-wage industries. Low-wage industry 's overall profitability rate is lower than the other sectors, many people worried that the statutory minimum wage would reduce hiring intentions in these industries, or even substantially reduce manpower, or will a part of the profits have been quite meager corporate profit into loss or even bankruptcy.

Finally, on the labor market, commodity prices and macroeconomic impact: since the implementation of the statutory minimum wage level, the unemployment rate remained largely unchanged at a low level, the situation of the labor market is close to full employment. Although the decline in individual sectors of the working hours, part-time ratio Yiyin the seasonal manpower needs or difficulties in recruitment and increased, however, little change overall. In addition, the implementation of the statutory minimum wage significantly enhance employment sentiment, the overall labor force continued to increase, an increase in the labor force participation rates of different age or educational attainment groups, especially women and older persons. In addition, the individual consumer, the larger the proportion of labor costs, the price is significantly higher than in the past few years, seen the level of the statutory minimum wage or less also push up inflation

Although most of the employees involved will benefit from the increase in wages, but some employees may also be reducing working hours, remuneration packages are restructuring, or even cuts.

5. Overview of the minimum wage situation in Pros and Cons
Overview of the minimum wage situation in Pros
Protection of workers ' salary: When social high unemployment, workers to face the threat of layoffs and pay cuts, there is no ability to consultation, the employer may take the opportunity to suppress the wages of the workers. With the minimum wage, the employment of low-income people will be able to obtain a salary to meet the basic needs of life.
Safeguard the dignity of workers: Minimum wage can solve the problem of some employers Underpaid, narrowing the surplus value, there are profits to solve the low-skilled workers, long working hours and low wages are the "working poor" phenomenon, against discrimination.
To maintain social stability: The increase in workers ' incomes, the consumption level of the community is also expected to increase as conducive to causing economic prosperity. The salaries of low-income people secure reduce the chances of low-income and derivative social problems, such as suicide, crime, domestic violence.
Job growth in various industries: The minimum wage is a positive effect on the macro economy the ─ improve the purchasing power of the workers can drive the job growth of various industries.
Eliminate unscrupulous enterprises, accompanied by increase in living space opportunity: Unscrupulous business is to survive through the exploitation of employees, particularly in the operation of the domestic market of the industry, unscrupulous businesses survive not only with industry pie rents floating liter interbank operations add to the burden. Their survival not only does not provide more jobs, but also the entire industry forced to cut workers salaries to cope with the floating-liter rent.

Overview of the minimum wage situation in Cons
The minimum wage is a price floor, the labor surplus exacerbates unemployment: Replace some SMEs or service industries to reduce costs, layoffs and savings, and replaced by other forms of commerce and labor, such as the establishment of a self-service counters, reduce service personnel, to switch to the black-market labor. As a result, the unemployed population is bound to improve.
Distort the market mechanism: If workers ' salaries are not based on market supply and demand to develop and replace them with a reasonable standard of living for workers and their families demand, may be caused by the different technical requirements for the type of work, indeed the same salary level.
Weaken competitiveness: The minimum wage is government intervention in the behavior of the operation of the market, potentially increasing the employers operating costs, weakening their competitiveness.
Damage the employment opportunities for low-skilled, low-educated and younger workers: Low-skilled workers with low qualifications and lack of experience of young workers less productive, so employers are only willing to pay lower wages. Minimum wage, the employer is only willing to employ higher educated, more experienced, more skilled workers. The minimum wage has caused the low-skilled, low-educated and young workers lose jobs completely.
You cannot improve the situation of the poor: Will have a negative effect on the distribution of economic justice. Minimum wage legislation, by its very nature, can only be for those who are the least experience, and most do not have the benefits of productivity and poorest workers. However, the implementation of the minimum wage so difficult for these people to get employment opportunities, in fact, only the most fortunate than most diligent junior workers will benefit. On the whole, not any one population can benefit.

6. Recommendation

The implementation of the minimum wage can only protect some of the labor class a certain degree of protection in revenue, but the actual cannot improve the employee to improve the life quality number, the government decided on May 1, 2013 to implement the minimum wage from $ 28 to adjust first $ 30, based on the community as a whole prices and inflation rising in low-income families, there is also little help. Moreover, in order to avoid the pressure made by the SMEs increase salaries, which led to the crisis of layoffs or closures. Suggest that the government may start in the SME can funded the SMEs expenses, for example, provide preferential lunch at the designated restaurant, reduce employee expenses. Provide on-the-job training programs funded, thereby improving productivity. Increase the tax exemption plan and additional travel subsidy.

7. Conclusion

To sum up, the 2011 macroeconomic situation the first level of the statutory minimum wage implementation to provide a very favorable environment, especially the easing of strong internal demand may be caused by the pressure of the statutory minimum wage on the employment situation and business environment, it is in the initial statutory minimum wage level before the implementation of the expected negative impact can be greatly alleviated.

Raised the statutory minimum wage to the recommended levels mostly involving an employee 's wages will be improved, to help improve the lives of low bargaining power of employees and promote their employment sentiment. Although some of the employee 's working hours may be reduced, and their remuneration package may be reorganized, or even cuts, but even considering the strategy adopted by enterprises in different economic scenarios to cut labor costs, most of which involve the average wage of the employees still get a certain degree of improvement. Meanwhile, the layoffs caused by the pressure of the recommended level of the statutory minimum wage is quite mild, we believe that the level has to strike a proper balance between the excessively low wages and reduce the loss of low-paid jobs.

The view was expressed that the statutory minimum wage led to rising operating costs, on the one hand, may hit aspiring entrepreneurs who desire the other hand, may be part of the competitiveness of weaker corporate profits decline, or even losses, and graduation. These cases is whether there are any, can be learned through the analysis of the number of establishments, business registration number, as well as bankruptcy and company winding-up petition changes. Be seen from Table 4.5, after the implementation of the first level of the statutory minimum wage, as a whole and the number of low-wage sectors joyous rise. As of June 2012, the number of establishments hit a record high of 349 645 (or an increase of 1.7% year-on-year). Shows, entrepreneurial sentiment seems to be no significant negative impact due to the implementation of the first level of the statutory minimum wage.

8. Bibliography

1. Reference,http://www.fairwork.gov.au/media-centre/latest-news/2012/06/Pages/20120601-2012-minimum-wage-decision-released.aspx 2. Reference, Denvir, A. and Loukas G., 2006. The Impact of the National Minimum Wage: Pay Differentials and Workplace Change. 3. Reference, Labor Standards Act 21, Laws & Regulations Database of the Republic of China 4. Reference Law "(April 15, 1959, No. 137) Minimum Wage Law" (excerpt) 4 (1)

Word count - 2462

Bibliography: 1. Reference,http://www.fairwork.gov.au/media-centre/latest-news/2012/06/Pages/20120601-2012-minimum-wage-decision-released.aspx 2. Reference, Denvir, A. and Loukas G., 2006. The Impact of the National Minimum Wage: Pay Differentials and Workplace Change. 3. Reference, Labor Standards Act 21, Laws & Regulations Database of the Republic of China 4. Reference Law "(April 15, 1959, No. 137) Minimum Wage Law" (excerpt) 4 (1) Word count - 2462