Minimum Wage Price Floor Articles

Minimum wage is an example of a government intervention in order to redistribute wealth through the use of a price floor.

Minimum wage price floor articles.

The most common example of a price floor is the minimum wage. In modern western countries labor is the primary recipient of price floors 1 in particular the government imposes a minimum wage making it illegal for an employer to pay a worker less than a certain amount per hour. If applied correctly the minimum wage can serve not just as a means to decrease inequality and fight poverty but can also increase market efficiency and the productive potential of the country. The minimum wage is a type of price floor therefore it carries the risks associated with this instrument.

More living wage definition. The minimum wage is a legally mandated price floor on hourly wages below which non exempt workers may not be offered or accept a job. In competitive sectors such as fast food research has found that a 10 increase in the wage floor pushes up burger prices by just 0 9. Minimum wage laws dictate the lowest price for labor that any employer may pay.

A price floor is the legal limit on how low a price may be set for a good. If minimum wage is set below the market price no effect is seen. At this rate the minimum wage of rm900 is called a price floor. Legislating a minimum wage is commonly seen as an effective way of giving raises to low wage workers.

A good example of how price floors can harm the very people who are supposed to be helped by undermining economic cooperation is the minimum wage. For a price floor to be effective it must be set above the equilibrium price. The wage rate adjusts to make the quantity of labor demanded equal to the quantity supplied. Price floors are used by the government to prevent prices from being too low.

Unfortunately it like any price floor creates a surplus. For example many governments intervene by establishing price floors to ensure that farmers make enough money by guaranteeing a minimum price that their goods can be sold for. For a price floor to be effective the minimum price has to be higher than the equilibrium price. Push the minimum wage significantly beyond that point.

In the case of minimum wage employees are the suppliers of labor the good while businesses become the consumers. Price floors are also used often in agriculture to try to protect farmers. Because this is the most popular and recognizable example of a price floor we will concentrate on it for the rest of this.