Legislation on Minimum Wage


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Legislation on Minimum Wage

  1. 1. L egislation on M inimum W age Course: POLS1120 Political Economy Instructor: Professor Michael E. DeGolyer Bill Lei 08531501 Nell Tang 08532796
  2. 2. What is Minimum Wage? <ul><li>the lowest hourly, daily or monthly wage that employers may legally pay to employees or workers </li></ul>
  3. 3. Analysis from textbook
  4. 4. Analysis from textbook <ul><li>Minimum Wage as “Price Floor” </li></ul><ul><li>Supply of labor > Demand of labor </li></ul><ul><li>at minimum wage level </li></ul><ul><li>Number of Unemployed labor </li></ul>
  5. 5. Problems of the textbook model <ul><li>Professor Gary Fields argued : </li></ul><ul><li>The textbook model measures only a one-sector market. </li></ul><ul><li>Low-wage labor markets characterized as monopolistic competition. </li></ul><ul><li>- Employers have more market power than do workers . </li></ul><ul><li>The demand for the product the employees produce is highly inelastic. </li></ul>
  6. 6. Minimum Wage in the U.S. <ul><li>In the U . S . , minimum wages were first introduced nationally in 1938 . </li></ul><ul><li>The federal minimum wage provisions are contained in the F air L abor S tandards A ct ( FLSA ). </li></ul><ul><li>The federal minimum wage is $6.55 / hr effective July 24, 2008 </li></ul>
  7. 7. Minimum Wage in the U.S.
  8. 8. Minimum Wage in China <ul><li>The Ministry of Labor and Social Security set China's first minimum wage law on 1 March 2004. </li></ul><ul><li>Provinces, municipalities, and autonomous regions are allowed to legislate for their own minimum wage </li></ul>
  9. 9. Minimum Wage in China <ul><li>Guangdong Province increased its minimum wage on 1 September 2006 . The highest is ¥25.80 per month or ¥4.66 (~US$0.60) an hour (in Guangzhou city). The lowest is ¥ 20.70 per month or ¥0.69 (~US$0.25) an hour </li></ul>
  10. 10. Minimum Wage in the E.U. <ul><li>In the European Union 18 out of 27 member states currently have national minimum wages . Many countries, such as Norway, Sweden, Finland, Denmark, Switzerland, Germany, Austria, Italy, and Cyprus have no minimum wage laws but rely on employer groups and trade unions to set minimum earnings through collective bargaining. </li></ul>
  11. 11. Minimum Wage in Australia <ul><li>In 1896 in Victoria, Australia, an amendment to the Factories Act provided for the creation of a wages board. </li></ul><ul><li>1 October 2007,  $13.74 per hour or $522.12 per week </li></ul><ul><li>1 October 2008,  $14.31 per hour or $543.78 per week. Same as 2009. </li></ul>
  12. 12. Minimum Wage in Canada <ul><li>The first minimum wage legislation in Canada was passed in 1918 by both British Columbia and Manitoba . </li></ul><ul><li>Two years later, Ontario , Quebec , Nova Scotia , and Saskatchewan followed suit. </li></ul><ul><li>T hese early wage laws applied only to women and only to some kinds of employment . </li></ul>
  13. 13. Minimum Wage in Canada <ul><li>The legal minimum wages in each of Canada's provinces for 2009/2010 are as follows </li></ul>
  14. 14. Minimum Wage in Hong Kong <ul><li>Currently, There is no minimum wage in Hong Kong for local residents. </li></ul><ul><li>But this issue has been discussed for years. </li></ul>
  15. 15. Minimum Wage in Hong Kong <ul><li>Some parties always assemble and go demonstration for the legislation. </li></ul>
  16. 16. Minimum Wage in Hong Kong <ul><li>In 2006, the HK government launched the Wage Protection Movement for cleaning workers and security guards, but it was unsatisfactory. </li></ul><ul><li>In July 2009, the bill of Minimum Wage was introduced to the LEGCO. </li></ul>
  17. 17. Minimum Wage in Hong Kong <ul><li>The level of the minimum wage will be based on the data from the Census and Statistics Department . </li></ul><ul><li>The ordinance is estimated with effect in 2010 or 2011. </li></ul>
  18. 18. Arguments for Minimum Wage Law <ul><li>Increases the standard of living for the poorest and most vulnerable class in society and raises average </li></ul><ul><li>E ncourages employee to work harder. </li></ul><ul><li>Does not have budget consequence on government. </li></ul>
  19. 19. Arguments for Minimum Wage Law <ul><li>Stimulates consumption, by putting more money in the hands of low-income people who spend their entire paychecks </li></ul><ul><li>Decreases the cost of government social welfare programs by increasing incomes for the lowest-paid . </li></ul>
  20. 20. Arguments against Minimum Wage Law <ul><li>Causes outsourcing and loss of domestic manufacturing jobs to other countries . </li></ul><ul><li>Reduces profit margins of business owners employing minimum wage workers, thus encouraging a move to businesses that do not employ low-skill workers. </li></ul>
  21. 21. Arguments against Minimum Wage Law <ul><li>Businesses try to compensate for the decrease in profit by simply raising the prices of the goods being sold thus causing inflation and increasing the costs of goods and services produced. </li></ul>
  22. 22. Why do governments legislate on minimum wage ? <ul><li>In the classical approach, minimum wage is considered as a means to intervene the market. </li></ul><ul><li>Hong Kong was criticized for the minimum wage legislation, as HK is said to be the freest economy. </li></ul>
  23. 23. Why do governments legislate on minimum wage ? <ul><li>Other than the problems of the textbook approach, economists seldom take political influences into account. </li></ul><ul><li>When politics are considered, the government needs to legislate for the minimum wage. </li></ul>
  24. 24. Why do governments legislate on minimum wage ? <ul><li>One possible reason, the pressure from the interest parties. </li></ul><ul><li>- like the unions and some of the Legislative Council members </li></ul><ul><li>Another possible reason, to maintain social stability. </li></ul>
  25. 25. Summary <ul><li>Minimum Wage is becoming more and more common in different countries. </li></ul><ul><li>The legislation on Minimum Wage is not only an economic issue, but also a political issue. </li></ul>
  26. 26. References <ul><li>Analysis from textbook  </li></ul><ul><li>David Card and Alan B. Krueger, Myth and Measurement: The New Economics of the Minimum Wage , Princeton University Press, 1995, pp. 1, 6-7. </li></ul><ul><li>Problems of the textbook model  </li></ul><ul><li>Gary Fields, &quot;The Unemployment Effects of Minimum Wages,&quot; International Journal of Manpower , Vol. 15, issue 2 (1994), pp. 74-81. </li></ul><ul><li>Minimum Wage in the U.S.  http:// www.dol.gov/esa/minwage/america.htm </li></ul><ul><li>Minimum Wage in China  http://www.sgs.com/newsletter_aug_06_-_english.pdf </li></ul><ul><li>Minimum Wage in the E.U.  http://epp.eurostat.ec.europa.eu/cache/ITY_OFFPUB/KS-NK-06-009/EN/KS-NK-06-009-EN.PDF </li></ul><ul><li>Minimum Wage in Australia  </li></ul><ul><li>http://www.fairpay.gov.au/NR/rdonlyres/32FFBED2-CC68-45FE-B1B2-0D6478206DA2/0/AFPC_July07_Decision_ExecSum.pd f http://www.fairpay.gov.au/NR/rdonlyres/32FFBED2-CC68-45FE-B1B2-0D6478206DA2/0/AFPC_July07_Decision_ExecSum.pdf </li></ul>
  27. 27. References <ul><li>Minimum Wage in Canada  </li></ul><ul><li>http://www.cbc.ca/money/story/2009/01/23/f-money-minimum-wage.html </li></ul><ul><li>http://www.livingin-canada.com/minimum-wage-canada.html </li></ul><ul><li>Minimum Wage in Hong Kong </li></ul><ul><li>http://www.takungpao.com/news/09/06/30/FYTX-1105191.htm </li></ul><ul><li>Arguments for Minimum Wage Law  </li></ul><ul><li>Richard B. Freeman (1994). Minimum Wages – Again! . International Journal of Manpower </li></ul><ul><li>http://www.epi.org/publications/entry/issue_guide_on_minimum_wage/ </li></ul><ul><li>Arguments against Minimum Wage Law  </li></ul><ul><li>http://www.nwu-oppose-offshoring.org/offshoring-campaign/high-tech-offshoring.html </li></ul><ul><li>http://www.heritage.org/Research/Labor/BG1162.cfm </li></ul><ul><li>Why do governments legislate for minimum wage?  </li></ul><ul><li>http://www.citizeneconomists.com/blogs/2009/03/11/do-we-need-minimum-wage-legislations / </li></ul>