Some people argue that establishing a minimum wage is an additional cost to employers because it leads to a fall in quantity demanded for labor and employers have to lay off some workers because they cannot afford to pay higher wages. As wages increase, the quantity of labor demanded couplesd with the increase in the quantity of labor supplied results in unemployment
However, I believe that establishing a minimum wage is beneficial for society. Before the government introduced a price floor, there was an equilibrium wage rate in the economy as the quantity demanded for labor was equal to quantity supplied. But the equilibrium wage rate was not high enough to satisfy the daily needs of workers. As a result, most workers earning that wage would live in poverty. With an increase in the minimum wage, workers have extra money to spend on various goods and services, which aids economic growth. Establishing a minimum wage is a benefit to society.
Minimum wage is a labor policy imposed mostly during the <em>20th century</em> as a type of securing welfare and minimising exploitation. It increases the standard of living of workers, reduces inequality and poverty and boosts morale. It gives the bargaining power to the workers and increases the efficiency of the market. Many economists argue that the minimum wage has a positive impact on small businesses.
Minimum wage also increases aggregate demand by raising the purchasing power and increasing consumption and spending which then moves the economy forward.
However, some social democracies like Sweden, did not impose the minimum wage policy on the national level, but instead, salaries and benefits are negotiated between the labor union and employer organizations. The purpose of minimum wage is still a subject of debates and research, and there is a wide ranging opinion regarding its justifiability.
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