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Impact of MW on Unskilled Workers' Employment Level (Article Sample)


its about free market aproach


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Impact of MW on Unskilled Workers' Employment Level
Policymakers normally suggest the use of Minimum Wages (MW) as a way of increase in employees' income and to reduce poverty level (Schmitt, 2013). However, different researchers show that there are substantial negative impacts of this policy on employment. Since young unskilled adults are the most significant group that benefit from MW policy, legislators must comprehend how it affects their job before implementing it. Such a law comes at a price to others. Imposition of the MW raises the hourly salary of these individuals.
Nevertheless, managers respond to the increased labor cost for the unqualified workers by decreasing their working hours or reducing the workforce. For this reason, youths search for jobs that pay highly hence creating a gap between the jobs available and the number occupation desired. This gap, in turn, results to unemployment. These jobless persons burden their families financially (Ruan, 2017).
Again, the late entry in the workplace decreases their lifetime incomes. Managers may minimize or eliminate training chances which they had funded earlier on through reduced training funds resulting in decreased long-run salary. The standard economic theory postulate that MW imposition raises joblessness and reduces employment level. The same model argues that labor market for unqualified young adults assumes that there is a competitive market such that neither the manager nor the worker can determine the market wage (Neumark et al., 2014).
Conversely, given that the market for these employees is monopsonistic, indicating that the organization has market power and hence can affect the income. As a result, adding the MW would, therefore, increase the youth's jobs. Therefore, MW may not be the solution to improving employment market situations of unqualified workers.
Impact of MW on Skilled Workers' Employment Level
An occupation that requires an enhanced knowledge regarding a particular skill or trade falls into the category of qualified labor. Skilled labor may vary from one location to another although it applies to only employees who have long-term formal training (Neumark et al., 2014). MW for such a laborer varies based on the staff exemption or non-exemption which focuses on the duties and not the titles. Managers monitor their workers based on the task they perform to determine if they are qualified to deserve MW.
The policy may fail to affect workers with varied skills although those with higher qualification may substitute those with lesser competencies. Neumark et al. (2014) argued that increase in MW may encourage automation in firms that require skilled personnel thus raising their demand. Consequently, it leads to the increased employment level of such individuals.
Impact of MW on Poverty Rate
Poverty remains to be a challenge in many households globally. There are higher instances of poorer health, food insecurity and lack of adequate education (Ruan, 2017). These problems are as a result of poverty. Policymakers try to dive in to mitigate this issue through the imposition of MW. Increased MW raises the wages which allow the workforce to spend more resources hence improving their living standards. Again, businesses acquire enough revenue to continue hiring more workers due to higher demand for commodities. As it may seem that MW reduces poverty rate, numerous theories prove the contrary.
Many people are less fortunate due to unemployment hence increasing MW won't help them. Federal guidelines do not consider workers as poor. MW increment result to added production cost for businesses which in turn lowers the demand for low skilled laborers. The increase in joblessness is coupled with the fact that products will become costly hence reducing their demand (Schmitt, 2013). Consequently, this results to a higher rate of poverty.
Business Owner Option
Labor costs can force the business owner to either cut cost, raise prices of commodities or reduce the profit margins. Since the clients' insatiable demand for decreasing expenses goes on and on, and the employers usually want to gain profit over and over, the only realistic choice is reducing cost. This activity can only be carried out by an introduction of machines or self-service. There is saving of resources through automation because it lowers the need for businesses to pay the worker to serve them.
Also, it reduces the number of employment level. Studies show that customers trade at minimum prices for fewer services, hence putting more careers at risks as labor cost goes beyond the productivity limit (Schmitt, 2013). Increasing MW lowers chances for business to employ workers with limited skills making it difficult to hire new workforce thus few employees remain the firm to operate on the machines. Another choice that employers would go for is looking for international workers who will spend fewer resources leading to increased profitability.
Inelastic product demand
Increasing MW means raising th...
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