Legal Prices: Collect Information Minimum Wage. State

¶ … Legal Prices: Collect information minimum wage. State purpose legal price, assess impact market labor, evaluate extent achieves purpose. List Resources: Bureau Economic Analysis - http://bea.

Evaluating legal prices: The minimum wage

The modern day employee is viewed as the most valuable organizational asset and sits at the core of the company's ability to attain its overall objectives. In such a setting then, the employers compete for the best skilled and qualified employees, and the staff members benefit from higher wages and better incentives.

Nevertheless, this was not always the status of the employees. The first employers were the factory workers, who migrated from the villages to the cities in search of better lives, but were mostly confronted with exploitation on the part of the factory owners, long hours of work, insufficient pay, unsafe and unsanitary working and living conditions.

The workers eventually rioted and were met with resistance and violence on the part of the factory owners. Gradually however, they formed unions and the policy makers came to side with the labor force. Several legislations were passed throughout the years in order to protect the employees and prevent abuses from reoccurring. Some examples in this sense include the American with Disabilities Act of 1990 or the Civil Rights Act of 1993.

As part of the overall effort to protect employees from abuses, the states also implemented the minimum wage, which is assessed as a measure prohibiting the employers from paying any employee a wage below the minimum set by the federal institution.

In other words, the minimum wage represents "the minimum amount of compensation an employee must receive for performing labor. Minimum wages are typically established by contract or legislation by the government. As such, it is illegal to pay an employee less than the minimum wage" (Investopedia, 2012).

The scope of minimum wage is that of protecting the staff members against a possible exploitation by their employers. The level of the minimum wage is set differently in each country, based on macro and micro economic features in each region. Some notable economic traits considered in setting the minimum wage include the inflation rate in the country, the purchase power of the individuals, the size of the labor force, the national output and so on. At a particular level, the minimum wage is set in direct relationship with the prices within the national market and it strives to reflect the ability of any employee to afford the basic necessities in life.

Despite the social dimension of the minimum wage, economists have often argued that the measure generates negative impacts upon the economies, which are forced to comply with regulations that do not derive from market realities.

"Minimum wages have drawn strong criticism from many economists, since it establishes a price floor on wages. Price floors can lead to a dead weight loss in the economy, which means that inefficiencies exist. In this case, the minimum wage might force companies to hire fewer employees, thus increasing unemployment" (Investopedia, 2012).

Within the United States of America, the minimum wage per hour is set at $7.25 for any category of employee who is not exempt from the application of the law; for the category of employees younger than 20, the U.S. has set a minimum hourly wage of $4.25, which can only be paid throughout a three-month duration starting the initial employment within a firm (United States Department of Labor, 2012).

Across the country however, the states have implemented various minimum wages, as revealed in the table below:

State

Basic minimum rate

1.

Alabama

No state minimum wage

2.

Alaska

$7.75

3.

Arizona

$7.65

4.

California

5.

Colorado

$7.64

6.

Connecticut

$8.25

7.

Delaware

$7.25

8.

District of Colombia

$8.25

9.

Florida

$7.67

10.

Georgia

$5.15

11.

Idaho

$7.25

12.

Illinois

$8.25

13.

Kansas

$7.25

14.

Louisiana

No state minimum wage

15.

Maryland

$7.25

16.

Massachusetts

$8.00

17.

Michigan

$7.40

18.

Mississippi

No state minimum wage

19.

Nebraska

$7.25

20.

Ohio

$7.70

21.

Oregon

$8.80

22.

Puerto Rico

$4.10

23.

Tennessee

No state minimum wage

24.

Texas

$7.25

25.

Utah

$7.25

26.

Vermont

$8.46

27.

Washington

$9.04

28.

West Virginia

$7.25

29.

Wyoming

$5.15

Source: United States Department of Labor, 2012

As it has been stated before, the scope of the minimum wage is that of protecting the employees against potential abuses on the part of the employers. This application is mostly obvious at the level of the low base employees, rather than the knowledge employees or the managerial staffs. In other words, the minimum wage is intended to protect the socially and economically disadvantaged categories of the population.

One outcome of the minimum wage implementation is that it helps reduce the income gap by not allowing employers to pay less than the legally established limit. Then, it also helps reduce abuse and it helps adults maintain their jobs. The wealth that is better shared nevertheless is completed through a forced process; furthermore, this mechanism promotes employers who do not afford to pay the minimum wage to make use of illegal employment techniques. Last, the minimum wage also generates inflation (Morgan).

Also, increases in the minimum wages do not result in increases in the life standards of the poor population. Minimum wages however place increased pressures on employees, who come to invest less in the formation of the employees. Then, the minimum wage generates little impact on the employment of the youth, who are the predominant category of employees who work for minimum wage (Turner). All in all, the minimum wage seems unable to attain the scopes for which it was intended.

Within the actual labor force, the impact of the minimum wage is often unclear, with economists taking different stands.

"In general, there are two clearly dichotomic views as to the normative impact of a wage policy […]. On the one hand, there are those who argue that the minimum wage fosters a better distribution of resources in the economy, so as to improve the population's general welfare by helping reduce poverty, increase productivity, and stimulate economic growth. On the other hand, we hear holders of the distortionist view argue that the minimum wage produces an inefficient allocation of labor and encourages rent seeking behaviors, thus negatively affecting investments and contributing to a reduction in the rate of economic growth" (Carneiro, Gill and De Barros, 2006).