Minimum Wage, Definition(s) of

  • A (36)
  • B (19)
  • C (58)
  • D (26)
  • E (34)
  • F (43)
  • G (20)
  • H (19)
  • I (27)
  • J (11)
  • K (1)
  • L (16)
  • M (27)
  • N (18)
  • O (18)
  • P (33)
  • Q (5)
  • R (30)
  • S (59)
  • T (16)
  • U (4)
  • V (7)
  • W (39)

"A minimum rate of pay that firms are legally obliged to pay their workers. Most industrial countries have a minimum wage, although certain sorts of workers are often exempted, such as young people or part-timers. Most economists reckon that a minimum wage, if it is doing what it is meant to do, will lead to higher unemployment than there would be without it. The main justification offered by politicians for having a minimum wage is that the wage that would be decided by buyers and sellers in a free market would be so low that it would be immoral for people to work for it. So the minimum wage should be above the market-clearing wage, in which case fewer workers would be demanded at that wage than would be hired at the market wage. How many fewer will depend on how far the minimum wage is above the market wage.

Some economists have challenged this simple supply and demand model. Several empirical studies have suggested that a minimum wage moderately above the free-market wage would not harm employment much and could (in rare circumstances) potentially raise it. These studies are not widely accepted among economists. Whatever it does for those in work, a minimum wage cannot help the majority of the very poorest people in most countries, who typically have no job in which to earn a minimum wage" (The Economist, n.d.)

Glossary Source: 

Minimum wage. (n.d.). In Economics A-Z: Economic terms, topics and jargon. Retrieved October 7, 2009, from http://www.economist.com/research/Economics/alphabetic.cfm?letter=M#minimumwage