Minimum wage – good or bad for business?

The questions around the minimum wage are always going to create a heated discussion and in my opinion is just another way for governments and usually socialist style governments to control the economy and turn things in to a nanny state!

What is a minimum wage?
The minimum wage is the lowest hourly, daily or monthly wage that employers may legally pay to their employees. Minimum wage laws also prevent workers from selling their labour at an amount which is lower than the minimum wage level. Those that defend and advocate a minimum wage say that it increases the standard of living of workers and also reduces poverty.

Whereas those that that are against minimum wage say that if the level is set high enough to be effective, then it increases unemployment and in particular among those workers with very low productivity due to inexperience or handicap.

Minimum wage history
It seems as though the origins of minimum wage were in Australia and New Zealand as far back as 1824 and became law in 1910, when Sir Winston Churchill was Prime Minister of the UK. Statutory minimum wages were introduced in American back in 1938 and all but five states of America have a minimum wage level.

18 out of the 27 member states of the European Union have minimum wage laws with the likes of Germany, Italy, Switzerland and Austria not having any such laws. In most cases the minimum wages are being set and manipulated by the unions. It can be seen from the success of countries like Germany that the arguments for a minimum wage do not hold and as far as I am aware poverty is no higher in Germany than it is in other European States.

The implications of minimum wage laws

In my opinion there should be no minimum, as things usually settle out in a capitalist economy – in my previous article on ‘are multi-million pound salaries ever justified?’ these high incomes are arrived at through market forces. For example if society no longer likes something then they will no longer buy and the company will then go out of businesses. If someone writes a book and there are no people that like the book then it will not sell! Equally, if a company sets their pay too low and there are other similar jobs with a higher pay rate then employees will simple vote by where they go.

The problem with most people is that that expect too much and they are not prepared to work for what they get. It is like employees that go on strike for example, the recent strikes at The Royal Mail, instead of striking, why don’t these employees simply move job or set up their own business? The answer is that they feel they are owed!

It was their choice to work as a postal worker and they knew full well what the pay was when they started – these businesses need to modernise or else they will simply join the dust pile like Woolworths. The UK’s car industry was destroyed by the unions! Employees just could not see that their selfish action destroyed the very company they were working for – their continual striking became the ultimate down-fall of Rover and of British Leyland.

Employees need to sit down and ask themselves the question “would I prefer to be in a job earning a wage whilst the company goes about modernising, thereby ensuring the future of the business so that there will be jobs now AND in the future?”

Employees tend only to see the Here and Now and not that in order to survive, the company has to look further forward. Change and investment in essential for any business and especially in today’s world with the Internet and the World Wide Web.

Also, those that want a minimum wage and those that are advocates of this system, should be prepared to move jobs in order to earn their preferred salary, instead of imposing a false wage level on businesses which in some instances the company cannot afford to do so.

The UK does have a current minimum wage and the government will increase this each year, normally inline with inflation, so businesses need to cope with raising minimum wage year to year to avoid any penalties.

Governments in the major world economies such as the UK and America need to carefully consider the effects on businesses from raising the current minimum wage level, especially in the current economic climate.

Minimum wage – good or bad for business?

7 thoughts on “Minimum wage – good or bad for business?

  1. You have given some nice explanation about minimum wages. I agree that if company can’t afford to increase the minimum wage, then the employees should move to a different company for the preferred salary.

  2. I think it is good to have a minimum wage. Germany does not have something like that and there is massive unemployment there at the moment, but most of the people support the idea of adding a minimum wage. So the fear of unemployment has nothing to do with this issue. With or without it the unemployment will exist and there are other factors that affect the job market rather than a minimum wage.

    What a modern economy needs is a rent control, People in Europe rent houses and they spend the 3/4 of their wages for the rent. This is inexcusable because if the rents were cheaper then the people would have the power to spend more and also some would be happy even with a part time job which leaves empty positions for more jobseekers.

  3. In the end a lot of it depends on the question of believing in the fairness of the free market. I don’t and also don’t know anyone around me who does, at least not completely. And if free market isn’t fair, there should be a minimal wage.

  4. I honestly think that minimum wage could be beneficial for many parties. First for the government, since the min. wage should be set in accordance with the min. average living expenses, it helps to cut down on unemployment and low income compensations; for employees knowing that in spite of all even during the bed economics time he/she can survive and feed the family. For employers – get rid of unions, they kill it all… once people get into union they fearless, they always unhappy and want to get more for doing less… that what basically happens a lot and killing a lot of business.

  5. I think that there should be a minimum wage. Perhaps in the long-term it all evens out, but employers are often forced to make short decisions base on immediate business needs, often at the expense of employees.

    I do agree with Nathan, that an employer receives the type of employees they deserve, but I do think that there needs to be some form of structure, including a minimum wage.

  6. When ever the minimum wage is increased, some employers will whine about it saying its unaffordable etc, I am sorry but if your margins are so small that an extra 20pence an hour is going to put you out of business, and then you should not have been in business in the first place.

    There are some advantages to having a minimum wage for employers, employ people that are eligible for tax credits or working family tax credits, pay them the minimum wage, and let the government subsidize your wage bill by topping up your employee’s salary with money taken from the rest of the working population.

    My own personal opinion is as an employer you get the workforce you deserve, people are not only motivated by money, most of them want to do a good job and feel valued.
    Your workforce is your greatest asset; you may have spent thousands training them either
    Through specialized or on the job training, and now your either treating them with dignity and respect or like something you’ve trodden in.
    You get what you give, employees know whether you value them or not. Value doesn’t have to be monetary in nature, acknowledgement of a task well done; an occasional thank you costs you nothing.

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