Minimum wage

A minimum wage is the lowest remuneration that employers can legally pay their workers. Equivalently, it is the price floor below which workers may not sell their labor. Although minimum wage laws are in effect in many jurisdictions, differences of opinion exist about the benefits and drawbacks of a minimum wage. Supporters of the minimum wage say it increases the standard of living of workers, reduces poverty, reduces inequality, and boosts morale.[1] In contrast, opponents of the minimum wage say it increases poverty, increases unemployment (particularly among unskilled or inexperienced workers) and is damaging to businesses, because excessively high minimum wages require businesses to raise the prices of their product or service to accommodate the extra expense of paying a higher wage.[2][3][4]

Supply and demand models point to welfare and employment losses from minimum wages. However, if the labor market is not perfectly competitive, minimum wages can increase the efficiency of the market. For example, in a monopsony labor market (i.e. only one employer available), a minimum wage set modestly above equilibrium wages can increase wages, employment, and economic efficiency. Considerable debate still exists among economists about the real-world effect of minimum wages.[5]

Modern national laws enforcing compulsory union membership which prescribed minimum wages for their members were first passed in New Zealand and Australia in the 1890s. The movement for minimum wages was first motivated as a way to stop the exploitation of workers in sweatshops, by employers who were thought to have unfair bargaining power over them. Over time, minimum wages came to be seen as a way to help lower-income families. Most countries had introduced minimum wage legislation by the end of the 20th century.[6]


"It is a serious national evil that any class of his Majesty's subjects should receive less than a living wage in return for their utmost exertions. It was formerly supposed that the working of the laws of supply and demand would naturally regulate or eliminate that evil [...and...] ultimately produce a fair price. Where... you have a powerful organisation on both sides... there you have a healthy bargaining.... But where you have what we call sweated trades, you have no organisation, no parity of bargaining, the good employer is undercut by the bad, and the bad employer is undercut by the worst... where those conditions prevail you have not a condition of progress, but a condition of progressive degeneration."

Winston Churchill MP, Trade Boards Bill, Hansard col 388

Modern minimum wage laws trace their origin to the Ordinance of Labourers (1349), which was a decree by King Edward III that set a maximum wage for laborers in medieval England.[7][8] King Edward III, who was a wealthy landowner, was dependent, like his lords, on serfs to work the land. In the autumn of 1348, the Black Plague reached England and decimated the population.[9] The severe shortage of labor caused wages to soar and encouraged King Edward III to set a wage ceiling. Subsequent amendments to the ordinance, such as the Statute of Labourers (1351), increased the penalties for paying a wage above the set rates.[7]

While the laws governing wages initially set a ceiling on compensation, they were eventually used to set a living wage. An amendment to the Statute of Labourers in 1389 effectively fixed wages to the price of food. As time passed, the Justice of the Peace, who was charged with setting the maximum wage, also began to set formal minimum wages. The practice was eventually formalized with the passage of the Act Fixing a Minimum Wage in 1604 by King James I for workers in the textile industry.[7]

By the early 19th century, the Statutes of Labourers was repealed as increasingly capitalistic England embraced laissez-faire policies which disfavored regulations of wages (whether upper or lower limits).[7] The subsequent 19th century saw significant labor unrest affect many industrial nations. As trade unions were decriminalized during the century, attempts to control wages through collective agreement were made. However, this meant that a uniform minimum wage was not possible. In Principles of Political Economy in 1848, John Stuart Mill argued that because of the collective action problems that workers faced in organisation, it was a justified departure from laissez-faire policies (or freedom of contract) to regulate people's wages and hours by the law.

It was not until the 1890s that the first modern legislative attempts to regulate minimum wages were seen in New Zealand and Australia.[10] The movement for a minimum wage was initially focused on stopping sweatshop labor and controlling the proliferation of sweatshops in manufacturing industries.[11] The sweatshops employed large numbers of women and young workers, paying them what were considered to be substandard wages. The sweatshop owners were thought to have unfair bargaining power over their employees, and a minimum wage was proposed as a means to make them pay fairly. Over time, the focus changed to helping people, especially families, become more self-sufficient.[12]

Other Languages
asturianu: Salariu mínimu
azərbaycanca: Minimum əmək haqqı
català: Salari mínim
čeština: Minimální mzda
Deutsch: Mindestlohn
eesti: Alampalk
español: Salario mínimo
Esperanto: Minimuma salajro
français: Salaire minimum
한국어: 최저임금
Bahasa Indonesia: Upah minimum
italiano: Salario minimo
Lëtzebuergesch: Soziale Mindestloun
magyar: Minimálbér
Bahasa Melayu: Gaji minimum
Nederlands: Minimumloon
日本語: 最低賃金
oʻzbekcha/ўзбекча: Ish haqi minimumi
português: Salário mínimo
Simple English: Minimum wage
slovenčina: Minimálna mzda
српски / srpski: Минимални приход
srpskohrvatski / српскохрватски: Minimalna plata
svenska: Minimilön
Türkçe: Asgari ücret
中文: 最低工資