Concept of Minimum Wages

Running Head: Human Resource Economics 0
Minimum Wages
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Concept of Minimum Wages 1
Table of Contents
Introduction...........................................................................................................................................2
Definitions and concepts of Minimum wages........................................................................................2
Arguments in favour of Minimum wages laws......................................................................................3
Argument against the Minimum Wages Laws.......................................................................................4
Example of India related to minimum wages........................................................................................5
Implementation of Minimum Wage in India: -..................................................................................5
Issues faced by India regarding such implementation: -....................................................................6
Conclusion.............................................................................................................................................8
References.............................................................................................................................................9

Concept of Minimum Wages 2
Introduction
This essay is related to the concept of minimum wages, various theories and
principles of minimum wages and the arguments for and against a country adopting a
minimum wages. By using India as an example, we described how the minimum wages is
being implemented in the country and also described what are the advantages and
disadvantages from adopting that implementation and how such implementation will affect
the country. Minimum wages refers as minimum amount of payment which employee has
right to receive. It includes basic wages and various types of allowances. Purpose and
objective of the concept of minimum wages is to protect the employees for unduly low
payment. Its main objective is to provide minimum wages to the all employees who are
working in the organized sector. There are also various advantages and disadvantages of the
concept of minimum wages.
Definitions and concepts of Minimum wages
Minimum wages have been defined as “the minimum amount of salary which
employer will be liable to pay to the employees for the work performed during the given
period of time, which is fixed amount it can’t be reduced by any agreement or contract
between employer and employee” (Webb, 2009). Purpose of minimum wages is to provide
minimum amount of remuneration to the employee for their performance, protect employee
against low remuneration, reduces discrimination among employees on the basis of age and
gender, overcome poverty and it will also reduce bargaining (Singapore Minimum Wage,
2019). There are various factors which affect the effectiveness of minimum wages such as
industry in the economy, migrant worker, agreements and contracts and the extent to which
company can afford protection to all the employees for maintaining employment relationship.
It affect positively on the employment. Firstly minimum wages concepts were implemented
in New Zealand in 1894. Minimum wages includes basic salary and other allowances but it
does not include travelling, housing and food allowances. Basic salary is calculate by
dividing 12 x monthly basic rate of pay by 52 average number of days an employee is
required to work in a week. According to the demand and supply model, when there is
increase in the minimum wage then there will be decreases the employment of minimum
wage employees (Yah & CHEW, 2009). It effects on employment, distribution of
remuneration among low paid worker and high paid worker, worker’s skills, prices, profits,

Concept of Minimum Wages 3
on-the-job training and the distribution of income among low income families and high
income families (Marginean, 2013). There is National Wages Council which guides and
provides all information related wages. Implementation of minimum wages is only relevant if
it is above the market wages. It is decided by the federal government.
Arguments in favour of Minimum wages laws
Following are the benefits while implementing Minimum Wages Laws:
1. Reduce poverty: By the concept of minimum wages, poverty level may be reduced.
Minimum wage increased the salary of the worker, it will increases their income
level, increase the standard of living for the poor employee because if their income
will increase then they will spend more on purchasing the products , overcome
poverty, removes financial stress and encourage education (Arguments for increasing
the minimum wage, 2019).
2. Increase productivity: The implementation of minimum wages will help in increasing
worker’s productivity. According to the efficiency wage theory, higher wages will
motivate and encourage the employee to work more hard thus it will increases their
productivity and efficiency. If company will pay higher to the employee then they will
perform better because of fear of losing their job. It also help in increasing job growth
and efficiency of the organization because the incremental in technological
development (Warren & Hamrock, 2019).
3. Increase incentives: It will be the additional incentives for the unemployed people
who are searching the jobs. It will also help to increase the participation rate of
unemployment because it encourages people to join the workforce and earn money.
4. Increase consumption: Minimum wages will increase consumption level in the
country because it helps in increasing the spending capability of the employees. So,
higher consumption level will automatically help the economy of the country (Keller,
Halkier, Wilska, & Truninger, 2017).
5. Decrease government spending: Minimum wages will effects government cost or
spending. It helps in reducing the cost of government towards social welfare
programs. If employees get minimum salary then they will on depend on the
government for fulfilling their needs rather than they will able to spending money on
consumption. So, government will be able to reduce the cost towards social welfare
programs and can use that money for investment. It will also help the government in