The Minimum Wage: Boon or Curse?

Abstract

In certain countries the choice is how to set the minimum wage rather than whether or not to provide one. The paper discusses the question of an effective minimum wage program. The minimum wage is a difficult juggling act: on the one hand, it must be reasonably high to ensure a generally acceptable standard of living. In the other hand, it should not be too high for low-performance employees to be priced off their careers. Evidence suggests that such equilibrium can be reached. When the minimum wage is set at a modest amount, there are no major job cuts and low income jobs are kept out of poverty.But the minimum wage cannot be used as an efficient method to alleviate poverty, as it is not well aimed at the disadvantaged. It can instead be used as an instrument to achieve a more equal distribution of wages. As it depends on a variety of country-specific considerations, such as labor market dynamics and shifts in job productivity across countries, sectors, professions, there is no general law as to the 'right' level of the minimum wage.The paper suggests that the rational minimum wage strategy should be focused on the study of wage allocation. The minimum wage should be adjusted in such a manner that it would not "too" limit the wage distribution of the impacted workers, such as teenagers, low-skilled workers and workers in the lagging areas.