The Impact of Minimum Wages on the Australian Labour Market

Essay
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Table of Contents
Introduction................................................................................................................................3
Minimum wages.........................................................................................................................3
Analysing the positive and negative impact of the minimum wages.........................................5
Recommendations......................................................................................................................9
Conclusion..................................................................................................................................9
References................................................................................................................................11
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Introduction
There are more than 11200000 people are employed in Australia as part time and full
time. The median age of working in Australia is 40 years with median earnings of $1230 per
week which is before tax for the full-time employment. Any country uses minimum wage
policies to ensure that an individual is maintaining and living a quality life. Australian
government prepares minimum wage law to control, rule and monitor the industry regarding
the fulfilment of minimum wage effectively. Minimum wages were mainly introduced by the
Australian government with the aim of taking care of the low skilled and low paid jobs. This
will also prevent the Company to take advantage of the poor employees who want to work
even at lower pay for their survival. The concept of minimum wage can be better
acknowledged with the understanding of labour market.
Minimum wages
Minimum wage is the amount of payment set by the government as a salary and is a
mandatory amount needs to be paid to employees. The minimum wage was addressed in the
year 1907 (Australian government, 2016). Australia introduced minimum wage with the
intention of allowing the man to support its family with the basic essentials and necessities.
The most advantageous result of the minimum wage has been found with preventing the
exploitation of the adults, children, women and even the educated workforce. The fair work
commission reviews the payment of the minimum wage every year. Presently, the national
minimum wage is $16.87 per hour or $640.90 before tax for the period of 38 hours a week
but is considered to be lower for the age group of 21 years. The goals of minimum wage were
accepted widely but there were still some disagreements on whether the goals of poverty
reduction are achieved via minimum wage concept. Minimum wage is nothing but all about
distribution. If the average wages are provided at above the equilibrium wage then labour
supply exceeds labour demand which leads to unemployment.
With the 10% increase in the average wages, there is a decrease in employment by
8%. Average wages increase employment and will absolutely reduce unemployment. Fall in
the unemployment rate is also due to the fall in the real unit of the labour cost with respect to
the same period (Barr, 2012). Real unit of labour cost can be considered as a cost of
employing labour which is also adjusted with inflation and productivity of labour articulated
as an index. With the slight increase in the wages lower than the inflation and less than the
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productivity then there will be a decrease in a real unit of labour cost. Economist has also
recognized that the real unit of labour cost is inversely related to the demand of labour. There
is a multitude of labour markets under which there is each labour market has its own supply
and demand. Firms majorly employ people who would have earned below the minimum
wages and thus unemployment rises among those groups. The workers are although substitute
with the workers earning above the minimum wage.
The truncation effect will also greatly tell the imposition of the minimum cuts into the
distribution of the jobs (Bernal-Verdugo, et. al., 2012). The larger would be the minimum
wage as against the market wage then large will be the truncation effect. Australia labour
market has high minimum wages which is also relatively higher than that of the earnings as
per international standards. There is an excess supply of labour in Australian labour market.
Between the years 1983 to 2003, there has been a drastic change in the labour market
of Australia. The part-time employment has been increased from 17 to 29% in the year 2003.
More participation in the part-time job has been found from the women who covered 46% of
women than 15% of men. There was also change in the composition of employment with the
passage of time and 34% of the people were employed in the goods-producing industries
which dropped with the percentage of 25% in the year 2003 (Australian government, 2016).
The participation has been increased from the advent of minimum wage laws.
Figure 1: Participation of labour force
Source: (Man, 2017)
The participation was also found more from the unqualified women which were also
the change towards the development of the economy of Australia.
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