Should there be a minimum wage and should it be increased?

CONTEMPORARY MACRO-ECONOMIC MANAGEMENT
Role of Government
Thomas Tang

Contemporary Macro-economic Management
Topic: Should there be a minimum wage and should it be increased?
Issue DONE
The issue relates to ensure that the employees are not exploited by employers especially
with regards to labour jobs where the employer may have a significant advantage with
regards to bargaining. As a result, it makes sense to have a law which defines the minimum
wages to be given to the employees so that the cost of living may be met (Mankiw, 2016).
Problem DONE
The increase of minimum wage is a controversial topic in Australia currently. There is a huge
debate in Australia every year about increasing minimum wage.In nations where there is
lack of a minimum wage, there is evidence to suggest that the wages given are quite low
and often incapable of providing a decent living standard to the concerned worker. The fact
that these jobs are low skilled implies that finding a replacement if often easy and hence the
low wages can be kept on a perpetual basis. This leads to a problem where there may be a
shortage of workers interested in low skilled jobs (Barro, 2017). Also, considering that there
is inflation and rise in the cost of living, hence it is imperative that there is increase in
minimum wages. However, it leads to rising production costs for various goods and services
thereby leading to loss of competitiveness and higher prices to consumers.Therefore the
minimum wage is to ensure workers earn enough and to support themselves to live on.
Since the minimum wage is first introduces in 1938 at a rate of $0.25 an hour, the minimum
wage has increased 22 times.
Where is it present DONE
The issue of minimum wage is primarily relevant only for the low skilled jobs as the wage
rates are higher for semi-skilled and skilled jobs. Further, security in terms of minimum
wage is also sought by these workers engaged in low skilled jobs as these are at times causal
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Contemporary Macro-economic Management
in nature and have low wages. In this regards, the minimum wage related protection is
relevant for these workers. Further, this acts as a benchmark based on which the
wages/salaries of other workers can also be fairly determined (Koutsoyiannis, 2013).
Evidence of the problem
As per a survey conducted in 2018, it is estimated that wage theft is quite prominent in
Australia with about one third of international students and temporary migrants working for
less than half of the minimum wage. The survey highlighted that the problem was severe in
some sectors such as farm work and vegetable picking. In these two sectors, there are 15%
workers where the hourly wage is less than $ 5 (Davey, 2018). Other surveys have also
highlighted similar discrepancies with regards to violation of minimum wage. The key issue
here is that if the monitoring of the minimum wage is ineffective, then the underlying
objective to introduce the same is defeated. Further, the problem may be more acute if
there is no defined minimum wage. If the problem persists in the presence of minimum
wage, then it can be understood that the problem would be more acute in the absence of
minimum wage. With regards to increase in minimum wage, the current minimum wage
level is quite healthy at $18.93 per hour or $719.2 a week and has been increased in both
3.5% as on June 1, 2018 (ABC, 2018).This is shown below.
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