Minimum Wage:
The Good the Bad and the Ugly




Minimum wage has become hot of late. Many countries have gone through the discussions and decided to implement laws controlling wage. This is considered as part of the search for effective salary management or compensation management strategy.

Will implementing such wage answer all the ills faced by employees?

It is expected to answer to the minimum needs of workers. They need to earn a decent wage. They do not have to beg for a living. But will it solve people's financial difficulties?

Some argue incoherently that implementing minimum wage will result in the closure of many companies. In the same breath, they say that price disparity has to end.

Closure of companies can happen. Does doing away with price disparity mean going higher or lower? They do not give a clear picture.

There are people who want the authorities to eliminate wage disparity. What this can mean is that minimum wage is the same throughout the country, irrespective of types of jobs.

Paying the same level of wage results in many employers facing financial difficulties. Standardization in the price of goods is easily enacted but hard to enforce.

People like Bill Gates point out some of the negative impacts of minimum wage. He argued that many people will remain without jobs due to the inabilities of companies to employ more workers.

Important matters to keep in mind Whether or not wage control is already in place, consider the following:

  • In a federalized system of government, allow member-states to enact laws on wage control. Whichever rate is higher, whether federal or state, the higher shall take precedence. This is the position in the United States.
  • Do not enact any such laws. Let the type of industries dictate wages including the minimum. This is more reflective of the types of activities that commercial entities carry out. Nation-city Singapore adopts this approach.
  • Let the age range dictate the minimum level of wages. The younger people are the lower the minimum. This may presume that younger people have lesser number of needs. This may also indicate that younger workers do not yet have the required experience and skills.
  • This is the case in New Zealand.

Price Disparity

Doing away with price disparity may not benefit certain regions or groups of people. This is true of underdeveloped regions in a country or among groups of people whose source of income is almost non-existent.

Cases like these call for special treatment. Take for example, the First Nation territories of Canada. People living there enjoy free-duty goods.

Further, getting rid of price disparity will mean getting rid of laws and policies that artificially inflate the price of goods. Take for example, the cabotage policy in Malaysia. It is criticized as one of the main causes for the higher prices of goods in Sarawak and Sabah in East Malaysia. The policy requires all goods shipment to Sarawak and Sabah to go through Port Kelang in Peninsular Malaysia, thus, incurring extra costs.

Apart from this, laws giving monopolies to certain entities have to go. The acts of the smallest number of people affect the lives of millions since they can dictate the price.

Price disparity is also caused indirectly by corruption. The authorities need to rigorously enforce anti-corruption laws without fear or favor.

Even payments referred to as "grease money" must end.

By the way, the country with the lowest level of corruption (2011) is New Zealand.

Profiteers are among the culprits in price disparity. Consumer goods are the favorite of profiteers. They know that people cannot do without consumer goods. Other sellers are motivated to follow suit.

Once prices go up, they rarely go down. Laws and strict enforcement are then required to reduce prices and to keep them down. These are seldom successful.


Why impose minimum wage

Without effective preventive measures to control prices of goods, implementing minimum level of wages will not achieve its objectives.

It is better for the type of industries to determine the wage level.

On the part of the authorities, they can offer valuable assistance in the form of price control, strict enforcement of anti-corruption laws, doing away with monopolies and polices that only help the small minority.




Sampling of Countries Having Implemented Wage Control
United States

~ 2010: US$7.25 per hour
~ Federal minimum wage is US$7.25 per hour; states may also set a minimum, in which case the higher of the two takes control

Singapore

Singapore has no minimum wage. Pay rates - legal pay - are agreed between the employer and employees through collective bargaining or other methods to negotiate a fair living wage.

Hong Kong

2011: HK$28 per hour.

Japan

~ Set between the range of 618 Japanese yen and 739 yen per hour.
~ Fixed on a prefectural and industry basis.

Australia

570.00 Australian dollars per week.

Malaysia
~ 2012: Peninsular Malaysia: RM900 per month
~ Sarawak and Sabah: RM800 per month


New Zealand

~ Workers 18 years old or older: NZ$13.50 per hour
~ Workers aged 16 or 17 or in training: NZ$10.80 per hour

United Kingdom

~ Aged 21 and older: £6.08 per hour
~ Aged 18–20: £4.98 per hour
~ Under 18 and finished compulsory education: £3.68 per hour

The Philippines

~ Agricultural workers in the Southern Tagalog Region: Peso 187 a day
~ Non-agricultural workers in the National Capital Region: Peso 434 a day
~ Set by tripartite regional wage boards

It is fairly clear that developed countries implement minimum wage. The majority of working people will benefit.

But organizations can also manipulate this by not paying people based on the job that they perform. If when employees fail to perform according to their organization's expectation they are redeployed or, worse still, sacked.



Implementing such wage policy may NOT motivate workers
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