Minimum Wage Legislation Essay

1428 words - 6 pages

Minimum Wage Legislation Assignment

Minimum Wage Legislation

Date: November 14, 2012

Student's Name: Jason

Class Number: AF4-4

ID Number: SBC-11-0445

Professor's Name: Andy Ritrche

Word count: 1302

Minimum Wage Legislation Assignment

Minimum Wage Legislation Assignment


The mitigation of poverty is increasingly seen as a primary economic objective. Poverty creates many economic costs in terms of the opportunity cost of lost output, the cost of welfare provision associated with exclusion from normal economic activity. It can be argued that one of the roles of government is to reduce poverty, and the minimum wage law is a in a typical way that government used to reduce poverty (Sloman, 2010). However, it also creates many debates around minimum wage laws. Proponent of minimum wage believe is a way to help the poor I the society. Opponent view it as a factor of unemployment. This essay will centrally discuss how the minimum wage law influences on the labor market over time, and next will analysis the extent to which minimum wage law would give a negative or positive effect on the poverty people. And final will draw a conclusion and also give some recommendation for implementing minimum wage law.

Task a:

A minimum wage law is a piece of legislation that prevents businesses from hiring workers for hourly wages that fall below a specified level (Field, 1984). The minimum wage law intends to ensure that low-paid workers receive fair compensation for the work they do. Thus, introducing a minimum wage can theoretically guarantee that workers will be able to afford to pay for the necessities (Hammermesh, 1982). A minimum wage can either be above or below the equilibrium price as shown by the lines 1 and 2 in diagram A. The equilibrium price is the price at which the quantity demanded for a good or service is equal to the quantity supplied (Anderton, 2008).

The line 1 is the minimum wage was below the equilibrium wage, and the market wage rate will be adjusted by balancing the labor demand and supply. Line 2 is the imposed minimum price is above the equilibrium price. In such case, the quantity of supply is greater than the labor demand. So it will create a surplus in the labor market. According to Mankiw (2006), "surplus is a situation in which quantity supplied is greater than quantity demanded."

The degree of the effect basically depends on the elasticity of demand. For the highly skilled and educated people who are well paid and even outdistance the

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