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The minimum wage is the minimum rate a worker can legally be paid (often per hour) as set by statute. It is usually different from the lowest wage determined by the forces of supply and demand in a free market, and therefore acts as a price floor, but it's not necessarily a living wage. Each country sets its own minimum wage laws and regulations, and while a majority of industrialized countries has a minimum wage, many developing countries have not.
Minimum wage laws were first introduced nationally in the United States in 1938[1], France in 1950[2], and in the United Kingdom in 1999[3]. In the European Union, 18 out of 25 member states currently have national minimum wages[4]. Supporters say that minimum wages reduce exploitation, they can help ensure that everyone can afford to live and that they do not have negative effects on employment, or only very little. Opponents on the other hand contend that minimum wage causes inflation and unemployment, harms rather than helps the poorest workers, and slows economic growth.
History
The first moves to legislate wages did not set minimum wages, rather the laws created arbitration boards and councils to resolve labour conflicts before the recourse to strikes.
* In 1894, New Zealand established such arbitration boards with the Industrial Conciliation and Arbitration Act
* In 1896, the state of Victoria, Australia established similar boards
* In 1907, the 'Harvester decision' was handed down in Australia. It established a 'living wage' for a man, his wife and two children to "live in frugal comfort"
The established similar boards
* In 1909, the Trade Boards Act was enacted in the United Kingdom, establishing four such boards
* In 1912, the state of Massachusetts, United States, set minimum wages for women and children
* In the 1960s minimum wage laws were introduced into Latin America as part of the Alliance for Progress; however these minimum wages were, and are, low.
In the United States and other countries, minimum wage laws were a common demand of labor unions.
Hypothetical costs and benefits
Supporters of the minimum wage claim it has these effects:
* Reduces low-paid work, which may be unfair and exploitative.
* Stimulates economic growth by increasing the purchasing power of workers.
* Stimulates economic growth by discouraging labor-intensive industries, thereby encouraging more investment in capital and training.
* Encourages many of those who would normally take low-wage jobs to stay in (or return to) school and thus to accumulate human capital.
Opponents of the minimum wage claim it has these effects:
* Destroys jobs, creating unemployment or underemployment wherever and to the degree that the value of the job to the employer is less than the legal minimum wage.
* Reduces the quality of jobs near the margin as well as the quantity - with less room to negotiate on salary, employers will necessarily cut other key areas such as job training.
* Curbs economic growth by decreasing the supply of affordable labor.
* Decreases the opportunity for low-skilled workers to gain skills.
* The cost of government is increased due to assistance programs aiding the laid-off workers.
Some labor union contracts are based on the minimum wage; this produces a natural constituency to lobby for increases among union workers who typically earn far more than the minimum. Some public grants or taxes are also based on a multiple of the minimum wage, and this also can produce lobbying incentives in either direction. (For example, a worker may have an exemption if his earnings are below 2.5 times the minimum wage.)