Economics Report Australia 2022

Running head: ECONOMICS
Economics
Name of the Student
Name of the University
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ECONOMICS1
Table of Contents
Introduction................................................................................................................................2
Minimum wage in Australia.......................................................................................................2
Economic and Social arguments for minimum wage................................................................3
Economic Arguments.............................................................................................................3
Social Arguments...................................................................................................................5
Impact of minimum wage on Government, Employer and Employees.....................................5
Government............................................................................................................................5
Employer................................................................................................................................6
Employees..............................................................................................................................7
Conclusion..................................................................................................................................8
References list............................................................................................................................9

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Introduction
Minimum wage is the base rate of payment to an employee for ordinary hours of
work. Minimum wage generally depends on specific industrial instrument applicable to the
norms of employment. Employees and employers cannot be paid less than the legal minimum
wage even if they agree mutually. The policy of minimum wage is a practical example of
price control measures taken by the government. It is similar to the policy of price floor
where government sets a legal minimum price below which the product cannot be sold
(Seekings & Nattrass, 2017). A binding minimum wage is one where government sets the
minimum wage above the market clearing wage. The report is prepared to discuss the
economic and social arguments related to minimum wage in Australia. Impact on the
minimum wage has been discussed on various stakeholders of Australian Industrial Relation.
These stakeholders include the government, employers and employees.
Minimum wage in Australia
The National Minimum Wage in Australia implements a legal floor on market wage.
As announced in July 2018, the minimum wage in Australia for an adult employee was equal
to $18.93 per hour. Australia follows a detailed system for awarding wage which are layered
on top of National Minimum Wage. The award wage determined by NMW depends on type
of industry, skills, age and other qualification of workers (Bishop, 2018) The minimum wage
employees receive national minimum wage and they are mostly low-skilled workers.
Workers who are not covered under the award or enterprise agreement often receive a higher
wage. The national minimum wage and other associated wages are generally adjusted at the
same time every year. As a general norms wages are revised in the month of July. The size of
these adjustments are decided by Fair Work Commission. Historically, Fair Work
Commission either add a flat dollar value to all the awarded wage or make a similar

ECONOMICS3
percentage increase of all wages. The system of setting a minimum wage in Australia is more
complicated compared to other nation (Neumark, 2018). Unlike most nations where a
uniform wage is set as minimum wage, wage varies across different states of Australia.
Economic and Social arguments for minimum wage
For a considerably long period of time, Australia is leading the trend of minimum
wage. Victoria, one of the Australian states holds the second position that first introduced a
wage floor in the year 1896. Since then Australia remains the most generous state in terms of
minimum wage (Dube, Lester & Reich, 2016). There are both economic and social arguments
favoring minimum wage decision in Australia.
Economic Arguments
Minimum wage is the legal minimum wage that employers have to give to all the
hired workers. In economic terms, this is a kind of binding price floor where price is set
above the equilibrium market price. Similarly, minimum wage is well above the wage as
determined from labor demand and labor supply. An obvious consequence of minimum wage
is creation of excess supply of labor aggravating the problem of unemployment. At the higher
wage, supply of labor hour increases. Supply of labor hour increases for two reasons
(Preston, 2018) The exiting workers willing to work for more hours and new labors are
willing to enter the market at a higher wage. Demand of labor hours on the other hand
decreases as employers now face a higher cost for per unit of labor hours. This results in
excess supply of labor and unemployment which may hurt economic growth.