Minimum Wage: Costs and Benefits

Minimum Wage Costs and BenefitsINTRODUCTION AND DEFINITION OF MINIMUM profitsThe concept of negligible net has been an age long stinting public debate that has broadened economists horizon into examining both its costs and benefits. The whole concept behind nominal affiance basically deals with how the welf ar of workers in a country, state or geo interpretical region hatful best be improved upon. Since the premier of the industrial revolution which dates back to the early 19th century in England, token(prenominal) pursue has become an increasingly open and popular debate. However, this interpretation has faced stiff opposition from activist who clamor for a token(prenominal) wage bracket. From a broader perspective, some critics of the negligible wage concept has proposed that or else of increasing the wages that workers receive, the employers should be more than concerned about meliorate their welfare. This has been narrowed d take to include their place of abode, their feeding, health insurance and opposite benefits that are not included as donation of employees income. The proponents of employees welfare sport a strong belief that it would help the workers as it basically deals with economic development and in plus to this, would prevent the occurrence of wage inflation.However, there is a definition of stripped wage which is universally accept equal. According to the Wikipedia encyclopedia, it is only if defined as the least number in hours in basis of payment that an employer may legally pay to employees. In examining this definition, it simply tells us that it is based on a set of rules guiding employees compensation for operate rendered.COST OF MINIMUM WAGE algebraical AND graphic REPRESENTATIONALGEBRAIC REPRESENTATIONThe cost of minimal wage can be stand for algebraically via the matter income model. Hence, the cost is based on a macro-economic abstract given as GDP= C+I+G+X-M. Where they are give tongue to as followsGDP = Gross national product, C= Consumption, I= Investment, G= Government expenditure, X= Export, M= Import. In analyzing each of the by-line components, the followers are observations based solely on the cost of lower limit wage.CONSUMPTION With regards to the consumption of goods and services, opponents to an change magnitude in negligible wage believes that it would top out to a drastic reduction in the consumption of manufactured goods as well as services as the cost of labor is transferred to the consumers. This would contract to an gain in supply and a reduction in guide owing to cost.INVESTMENT Conservatives are of the sentiment that an annex in minimum wage would withdraw to a slowdown in investment. Employers would be unwilling to expand their business because of the heavy cost that would be paid to labor. This is because an emergence in minimum wage would drive up the cost of labor which is very essential to merchandise. Hence businesses would be reluctant to expand thereby leading to a reduction in investment in the long-run. politics EXPENDITURE Conservatives are of the belief that an add-on in minimum wage would drive up giving medication expenditure. To buttress their point, it should be noted that an adjoin in minimum wage would drive up the cost of production which would lead to job cuts. Job cuts would prompt the government to act right away by providing social security programs that would discourage people from engaging in social vices and illegal activities. This increases the government expenditure.EXPORTS An increase in the minimum wage would result in a drastic reduction in exports of the thing nation. This occurs as a result of the fact that when there is an increase in the minimum wage, it leads to an increase in the cost of production and at last an increase in the prices of goods to be exported. This would eventually lead to a reduction in the units of exported goods. importationS Increasing the minimum wage would lead to a sharp increase in the importation of goods. The foreign nation would want to make its own good cheaper in the subject nation where the increase has occurred. This may eventually lead to illegal trading activities such as dumping of goods or manufacturing of substandard goods. Hence foreign products would flock the domestic markets killing the domestic industry which would eventually lead to unemployment and a reduction in government revenue.GRAPHICAL REPRESENTATIONy axis vertebraQSo$11.00QS1QSo$7.25x axis(Minimum wage) 13.2units 20 unitsUnits of goods producedThe graph above represents the feeling of an increase in minimum wage on the cost of production. From the above graph, the y axis represents an increase in the minimum wage of workers from $7.25 to $11.00. This led to the following observations.At sign minimum wage of $7.25, the number of units produced was 20units, hence cost of production is $7.25 * 20 = $145.working by premiseAt sensitive minimum wage of $11.0 0, producers are trying to maximise output by reducing input. Hence new cost of production is $11.00 * 13.2 = $145.2 which is equivalent to $145. Hence the old cost of production is equal to the new cost of production (Ceteris paribus)As a result of this action initial quantity supplied by producers (QSo) is reduced from 20units to approximately 13units. This is represented by a left word course of the arrow from QSo to QS1, which signifies a reduction. In addition to this, the x-axis is also represented by a left word movement of the arrow from initial units produced (20units) to new units produced (13.2units equivalent to 13units)BENEFITS OF MINIMUM WAGE MATHEMATICALAND GRAPHICAL REPRESENTATIONMATHEMATICAL REPRESENTATIONFor a better representation of the benefits of minimum wage, the more or little appropriate model to be employed would be the national income model. This model was also used in the cost of minimum wage. It is stated asGDP = C + I + G + X MC- CONSUMPTIONPropone nts of minimum wage increase are of strong opinion that it increases the level of consumption among the citizens. This is based on one of the factors affecting supplicate which states that quantity demanded increase with respect to an increase in the income of individuals. In opposite words when the minimum wage is increase people would be able to bargain for more goods and services compared to the original amount.I INVESTMENTSince the proponents of an increase in the minimum wage believes it would eliminate low paying jobs and lead to higher paying jobs, hence as it pertains to investment, an increase in the minimum wage would lead to greater investment in high skilful industries which would be beneficial to gross domestic product. This type of investments would in most cases be long term and is very crucial in piteous a country from developing to developed.G- GOVERNMENT EXPENDITUREIncreasing the minimum wage would reduce the expenditure from government. This is according to p roponents who believe that workers would earn more as a result of the increase and thereby depend less on the government for welfare benefits. This would eventually reduce expenditure on the part of the government and lead to more revenue on the part of the citizens. This would be very helpful to the economy as it would create a balanced budget.X- EXPORTExports would be of great benefit to an increase minimum wage. The reason for this is that it would be very helpful in producing goods that meet internationalistic standards and can yield maximum utility. This would make the domestic countrys goods competitive in the international market thereby leading to a trade surplus in the long run. The basic reason for this is that with an increased minimum wage, employers demand more from employees. Hence their skills and competences are put to test.M- IMPORTAs regards import, an increase in the minimum wage would not be helpful to imputed goods. This is based on assumption of the proponents of minimum wage increase. It is powerfully believed that because the imported goods are cheap, they would most likely be substandard compared to those goods produced in the home country. Hence consumers would boycott these products and promote their domestic product instead. This would eventually increase the gross domestic product (GDP)In summary, an increase in minimum wage (Ceteris paribus) would be favorable to the economy given the following factors are synergized.GRAPHICAL REPRESENTATION BENEFITS OF MINIMUM WAGE Y axisQD1$11.00QDoQD1$7.25QDoX axis(Minimum wage) 1kg 3kgApples in kgThe diagram above represents the effect of an increase in minimum wage on consumption. A change analysis of the graph is stated thusIn the above diagram, the upright piano axis represents minimum wage. It also shows how the minimum wage has increased from its initial amount of $7.25to $11.00The horizontal axis shows the amount in kg of apples that consumers can purchase given their income.Ceteris p aribus, at $7.25 minimum wage, consumers are able to purchase 1kg of apples. When the minimum wage is increased to $11.00, there is a great increase by 2kg bringing the new consumption of apples to 3kg. This signifies that an increase in minimum wage has a positive effect on consumption.