What is the difference between a ‘binding’ and ‘non-binding’ minimum wage?
If there were no minimum wage, the wage would be set by the laws of supply and demand. At some wage level, the number of people who want to work for that wage will be equal to the number of people firms want to hire for that wage. If the minimum wage is below that wage level, it is non-binding because it doesn't matter that there is a minimum wage. Firms want to pay people more than the minimum wage because if they lower the wage they pay, not enough people would want to work. If the minimum wage is above that wage level, it is binding. Firms are forced to pay the minimum wage. Many people are willing to work at that wage. Firms cannot or are not willing to hire that many people at that wage. The minimum wage prevents the firms from lowering what they pay in order to accommodate all of the willing workers, so there is unemployment.
A binding minimum wage established by the government?
A binding minimum wage established by the government (a) will be effective only if the minimum wage is set below the free-market equilibrium wage. (b) is essentially a price ceiling that creates a shortage of workers. (c) will affect adversely only those workers whose value of productivity is greater than this minimum wage. (d) is a price floor that will create a surplus of workers if the labour market is competitive. (e) will have no effect on the quantity of labour employed.
Should Indian government have minimum wage law?
All the countries across the globe have the minimum wage law including even the developed capitalistic countries(that promote “free market”) such as US, UK etc. The underlying reason is the inherent imperfections in the labour market unlike others.Now, in India the minimum wage Act 1948(proposed to be codified soon) requires the minimum wages to be provided fir the skilled and unskilled workers. This is especially important because firstly, there is no unified market place where the going rate can be determined. Labour chowks do exist but are dispersed. In addition to the first, given that these workers fall under the informal sector, their unionization is not strong, thereby affecting their bargaining power in wage determination. Thirdly, the supply of such workers for casual Labour is huge, leading to lower wages and yet again lower bargaining power.Together, this implies that there needs to be some minimum binding constraint that prevents their over exploitation by the contractors/employers. This law can be considered then as a small part(and only a small part..!) of the overall social security that the indian government needs to provide to these workers.Besides the welfare objective (hence, the ethical necessity) , since India has ratified the conventions of the International Labour organization, the govt is required to provide a statutory apparatus for minimum wages. This is to ensure an overall move towards ILO’s ‘decent work’
What would happened if the government increase the minimum wage nationwide to 15 dollar an hour like New-York just did?
I’m honestly not sure that we know.There is ample research showing that, for most minimum wage increases as they have historically occurred in the US post WWII, there haven’t been large increases in unemployment or other problems.Now, the issue is that going from $7.25 to $15 an hour, even if phased-in over a few years, is something unprecedented. Unless I’m mistaken, the minimum wage has never increased by so much as $1 at a single time. Obviously, that’s less relevant due to inflation, but more than doubling the minimum wage over even a five year or so span is something utterly unprecedented in the US.So, I think it’s safe to say that it’s a terrible idea to do that nationwide. I don’t think it’s a huge problem (or frankly even a small problem, it’s at most a very minor problem if we’re being very pessimistic) if the minimum wage is $15 in New York City or San Francisco. I do think it’s a huge problem if the minimum wage becomes $15 in rural Alabama, or even rural Wisconsin where I live.As an example, you can find a living wage calculator here. Just looking a statewide comparisons, a living wage for 1 adult, no kids in Alabama is $11.14. In contrast, the amount required in California is $14.01, and in San Francisco County specifically it is $19.63.I’ve done the math, and I guarantee it would be possible for a single person to support themself where I live if they can consistently work 40 hours a week at the current minimum wage of $7.25. I am not saying they would be living a life of undeserved luxury, but they could get by, quite possibly living alone. I think it is very likely that many people would ultimately lose their jobs if the minimum wage here were $15 an hour. I think the problem would be even worse in the truly poor parts of the country, like Appalachia and the rural parts of the Deep South.There would also likely be significant inflation. Ultimately, I think the top beneficiaries of a $15 national minimum wage would be landlords.
Who are the winners and losers under a minimum wage policy?
I haven’t been able to pay anyone in the US minimum wage for decades. Even our janitorial staff makes $50,000 a year and they only work part-time.Do you know why?Because what you see as an amount written on your paycheck is not the only expense I encounter for employing you.Worker’s comp, social security, fica, health insurance, equipment put in place to ensure your safety, and toilet paper. Yes, I am getting into the ridiculous now, but when you use the bathroom, do you think of toilet paper as an expense I would not have if I did not have you as employee?I totally get that people want a living wage. But if the minimum wage was almost doubled here, I would fire half of my minimum wage workers because I could not afford the other expenses associated with employing that many people on top of the wage increase.No small business could.The pride that comes with your business reaching a point where it can afford to hire it's first employee is phenomenal and increasing the minimum wage would delay that feeling for many small business owners, possibly indefinitely. This would mean that business cannot expand. Most likely, it will end up closing it's doors, not matter how great their product or service is.If they could hire 2 people instead of only 1,…Most people think of large companies when they consider whether the minimum wage should be increased. They don't consider the impact that this increase will have on small businesses and those large companies? All started out as small businesses.Who gets hurts when the minimum wage increases? The ma and pop shops that are already disappearing from our economic landscape because they can't compete with the big names. Increase wages and we will see even less of them.Yes, a $15 an hour minimum wage is working in some areas of the US. Most of the businesses around here are small businesses, though. They are the cornerstone of our community. Without them, we would be like every other city in the US. If the landscape never changes, life would be really boring.
HELP! Suppose a senator introduces a bill to legislate a minimum hourly wage of $8. This type of price...?
control is called a ________ a) price ceiling b) price floor c) tax d) quota 2) Two other senators introduce bills which would set the minimum wage at $3 or $9 per hour. Which of these minimum wages would be binding? Check all that apply a) $3 per hour b) $9 per hour