Higher Minimum Wage Higher Unemployment.

MINIMUM WAGE and UNEMPLOYMENT 

The objective of minimum wages is to safeguard employees from unfairly low compensation. Minimum wages should be determined by considering economic and social factors into account.

Policymakers often propose a minimum wage as a means of raising incomes and lifting workers out of poverty. However, improvements in some young workers’ incomes as a result of a minimum wage come at a cost to others. Minimum wages reduce employment opportunities for youths and create unemployment. Workers miss out on on-the-job training opportunities that would have been paid for by reduced wages upfront but would have resulted in higher wages later. 

Most countries have a nationwide minimum wage that all workers must be paid. While India has no national minimum wage, minimum wages may be set by the state or sector of industry. Wages vary from 160 rupees ($2.40) per day in Bihar to 423 rupees ($6.35) per day in Delhi based on the Minimum Wages Act, of 1948.

HISTORY OF MINIMUM WAGE IN INDIA

India was among the first countries to institute a minimum wage. Proposals to enhance the working conditions of low-wage employees were made at the 7th session of the Indian Labour Conference in 1945. Three years later, the Minimum Wages Act of 1948 was enacted, and it has had an impact on India’s minimum wage policy ever since.

The Act first established minimum pay rates for employees performing specific scheduled jobs depending on skill levels and other variables. This legal structure also permitted the federal and state governments to establish varying minimum wages for different types of workers. India currently has 429 planned jobs, 45 in the Central sphere and 1,915 for unskilled labour.

IMPACT OF MINIMUM WAGE ON UNEMPLOYMENT IN INDIA

Minimum wages reduce labour demand as well as the total number of days worked by low-wage earners. The amount to which labour demand may fall is determined by labour demand elasticity. In a country like India, the employment effect is more likely to be induced by a change in the number of days worked by employees rather than by a rise in unemployment. It has been discovered that if minimum wages were extended to all workers, the likelihood of being poor would decrease by 7 to 9% depending on whether the worker was salaried or casual.

However, if the number of working days was reduced due to compulsory minimum wages, then the beneficial effects of minimum wages on the probability of poverty would also be reduced. The effects on salaried workers and casual workers depend upon the elasticity of labour demand. 

The elasticity of labour demand in the unskilled sector, which includes agricultural labourers, cleaners, sweeping workers, and supermarket clerks, is particularly high, which causes a high number of individuals to be left unemployed when the government raises the minimum wage. However, the highly skilled sectors have low demand elasticity and seldom experience unemployment as a result of rises in workers’ minimum pay. Workers in this area are already earning more than the minimum wage. These industries include banking, technology, data science, pharmaceuticals, and artificial intelligence, among others. Minimum wage increases in the semi-skilled sector, which includes manufacturing, textiles, construction, mining, and so on, reduce employment, which is greater than in the skilled sector but less than in the unskilled sector. The elasticity of labour in the semi-skilled sector lies in between that of skilled and unskilled sectors.

GENDER DISPARITIES 

Most studies indicate that a higher minimum wage decreases the gender wage gap by mostly affecting low-income workers. Minimum wage laws affect vulnerable workers the most. Women, regardless of whether or not there is a potential increase in the danger of losing their jobs, will benefit from gaining an increased minimum wage. It has been found that raising the minimum wage increases gender pay equality and helps low-paid women. Several research has discovered a negative relationship between the gender gap and the minimum-to-average wage ratio. In summary, most of the research finds that raising the minimum wage has a negative effect on reducing gender pay disparities.

IMPACT OF MINIMUM WAGE IN DIFFERENT PARTS OF THE WORLD

 USA

The US federal minimum wage is $7.25 per hour and has not been raised since 2009, but many states and cities have set their own higher minimum wage rates. The debate on minimum wage centers on the impact on unemployment, with supporters claiming that it can reduce poverty and improve living standards, while opponents argue that it can lead to higher costs for employers and job losses.The Biden administration has proposed a federal minimum wage increase to $15 per hour, but it has yet to be implemented.

EUROPE

Europe is home to a range of different minimum wage policies, with some countries setting minimum wages through collective bargaining agreements and others through government regulation. The debate on the impact of minimum wage on unemployment is also present in Europe, with different opinions on the issue.

Supporters of minimum wage increases in Europe argue that it can reduce poverty and inequality, while also stimulating the economy through increased consumer spending. They also argue that minimum wage increases can lead to a more stable workforce, which can benefit businesses and the economy in the long run.

Opponents of minimum wage increases in Europe argue that it can lead to higher labour costs for businesses, making it harder for them to compete in the global market. They also argue that it can lead to job losses, particularly for low-skilled workers and young people who are just entering the labour market.

CONCLUSION

Finally, the minimum wage and unemployment are critical issues for all countries. While raising the minimum wage can benefit low-income workers, there are concerns about the potential impact on job losses and competitiveness. Because each country faces a unique set of obstacles and opportunities as it attempts to expand its economy and better the lives of its population, government intervention in the form of a minimum wage for employees and businesses is essential.