Minimum Wage Theory Assignment Help
The article touches upon the failure of economists to predict the onset of a recession and even agree on the cause of it even now. The author is not very fond of the micro-economists approach (Noah Smith) to blame it on macroeconomists. The author is critical of the Obama administration attempts to raise the minimum wages across all industries as an attempted stop to low wage earners. But, he is equally unimpressed with the macroeconomic opinion on the impact of increasing the minimum wage and the lack of a unanimous viewpoint on the resultant advantages/disadvantages of it among micro economists. He offers the example of McDonalds as a counterpoint to the minimum wage theory. In general, the article ponders on the applicability of economic theory on real-world scenarios and attempts to seek a unique answer to economic problems from economists. The author concludes that economists are generally promoters of their own viewpoints, may it be a micro or a macroeconomist in any scenario and their opinion may not be applicable to resolve the economic situation.
The article review reflects upon the advantages and disadvantages of the increase in minimum wage. In this section, we would try to understand the meaning of minimum wage and we would also define the economic theory of minimum wage.
Minimum wage is the least wage fixed by the local government that has to be paid to the workers of the concerned nation. It is fixed by the legal authority of every country and the companies have to comply with it. They are the lowest rate at which any employer can employ any employee. It is authorized by the government and is applicable to all the workers in the country(Francis, et al. 1996, p342). The minimum wages were decided for the first time in Australia and New Zealand in the 1890s. Britain established its first trade boards in 1909 to set minimum wages in selected trades and industries.
The minimum wages theory says that increasing the minimum wage above the market equilibrium will lead to less demand for unskilled labor. This would happen because the increase in minimum wage would decrease the output due to increase in the cost of production. In this paper, we would further delve into this economic theory of minimum wage. We would also discuss the economic concepts which affect the minimum wage theory. We would also throw a light on whether increased minimum wage can improve the life of the unskilled labor. In the end, we would try to analyze the measures necessary to be taken to reap the benefits of the increased minimum wage.