Minimum wage

A minimum wage is the lowest remuneration that employers can legally pay their employees—the price floor below which employees may not sell their labor. Most countries had introduced minimum wage legislation by the end of the 20th century. Because minimum wages increase the cost of labor, companies often try to avoid minimum wage laws by using gig workers, by moving labor to locations with lower or nonexistent minimum wages, or by automating job functions. Minimum wage policies can vary significantly between countries or even within a country, with different regions, sectors, or age groups having their own minimum wage rates. These variations are often influenced by the cost of living, regional economic conditions, and industry-specific factors.

The movement for minimum wages was initially motivated by a desire to stop the exploitation of workers in sweatshops by employers who were thought to have unfair bargaining power over them. Over time, minimum wages came to be seen as a way to help lower-income families. Modern national laws enforcing compulsory union membership and prescribing minimum wages for members were first passed in New Zealand in 1894. Although minimum wage laws are now in effect in many jurisdictions, differences of opinion exist about the benefits and drawbacks of a minimum wage. Additionally, minimum wage policies can be implemented in various ways, such as directly legislating specific wage rates, setting a formula to adjust the minimum wage based on economic indicators, or establishing wage boards that determine minimum wages in consultation with representatives of employers, employees, and the government. Because it acts as a price floor on labor, standard supply and demand models predict that minimum wages will lead to a surplus of labor (unemployment), particularly among low-skilled workers. However, they can increase labor market efficiency and employment in monopsony scenarios, where individual employers have some wage-setting power over the market as a whole. Supporters of the minimum wage say it increases the standard of living of workers, reduces poverty, reduces inequality, and boosts morale. In contrast, opponents of the minimum wage say it increases poverty and unemployment because some low-wage workers "will be unable to find work ... [and] will be pushed into the ranks of the unemployed".

History

Amongst the earliest minimum wages were introduced in Mesopotamia during the reign of Hammurabi, while in Ancient Egypt many workers received minimum wages in the form of rations. In addition, measures aimed at ensuring fair wages were carried out during the days of the Byzantine Empire and in early Islamic societies. In medieval England, the Ordinance of Labourers (1349), a decree by King Edward III, set a maximum wage for laborers in medieval England. Edward, who was a wealthy landowner, was dependent, like his lords, on serfs to work the land. In the autumn of 1348, the Black Plague reached England and decimated the population. The severe shortage of labor caused wages to soar and encouraged King Edward III to set a wage ceiling. Subsequent amendments to the ordinance, such as the Statute of Labourers (1351), increased the penalties for paying a wage above the set rates. While the laws governing wages initially set a ceiling on compensation, they were eventually used to set a living wage. An amendment to the Statute of Labourers in 1389 effectively fixed wages to the price of food. As time passed, the Justice of the Peace, who was charged with setting the maximum wage, also began to set formal minimum wages. The practice was eventually formalized with the passage of the Act Fixing a Minimum Wage in 1604 by King James I for workers in the textile industry. By the early 19th century, the Statutes of Labourers were repealed as the increasingly capitalistic United Kingdom embraced laissez-faire policies that disfavored wage regulation (whether upper or lower limits). The subsequent 19th century saw significant labor unrest affect many industrial nations. As trade unions were decriminalized during the century, attempts to control wages through collective agreement were made. It was not until the 1890s that the first modern legislative attempts to regulate minimum wages appeared in New Zealand and Australia. In 1896, the Australian state of Victoria introduced a Factory Act that established boards for setting minimum wages for people employed in industries known for sweating, such as meat, bread-making, furniture, and clothing. In Germany, a guaranteed minimum wage was introduced during the chancellorship of Leo von Caprivi. The movement for a minimum wage was initially focused on stopping sweatshop labor and curbing the proliferation of sweatshops in manufacturing industries. The sweatshops employed large numbers of women and young workers, paying them what were considered to be substandard wages. The sweatshop owners were thought to have unfair bargaining power over their employees, and a minimum wage was proposed to ensure fair pay. Over time, the focus changed to helping people, especially families, become more self-sufficient. In the United States, the late 19th-century ideas for favoring a minimum wage also coincided with the eugenics movement. As a consequence, some economists at the time, including Royal Meeker and Henry Rogers Seager, argued for the adoption of a minimum wage not only to support the worker, but to support their desired semi- and skilled laborers while forcing the undesired workers (including the idle, immigrants, women, racial minorities, and the disabled) out of the labor market. The result, over the longer term, would be to limit the nondesired workers' ability to earn money and have families, and thereby, remove them from the economists' ideal society.

Minimum wage laws

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