Minimum wage and their effects has been widely discussed topic for labour economists and researchers  in recent years.

Different economists have all interpreted the effects differently, however they all tend to circulate around the same general questions- does a minimum wage increase unemployment? , and how do minimum wage policies affect a nation’s or region’s development ? , how do minimum wage policies affect the different groups of people in a given economy? While studies on the minimum wage typically focus on its effects on unemployment, I am going to interpret its effect on a wider scale of which includes; social effects, its effect on well being, effects on the government, the different wage systems, the effects with regards to trading partners (international trade), and to tackle inequality and inflation. IntroductionOver the years the has been a growing urge by governments all over the world to protect and cater to the rights and wellbeing of its nation’s labour force whilst at the same time trying to stimulate rapid growth and development in their respective nations. We can see this being done by the implementation of health and safety regulations, making sure that workers are not discriminated against and that everyone has the right to equal pay for equal work regardless of race gender, sex, or religion.

One of the measures that the government has taken is the introduction of the minimum wage.A minimum wage is the lowest amount of money (wage) that employers are legally allowed to pay you. The minimum wage is widely used by governments all over the world to improve the level of pay among workers and is directly used to also redistribute income in the economy. The aims are to  a.

protect labourers’ interest by making sure that they are not exploited and underpaid; b. Redistribute income and promote greater social equality by closing or lessening the wage gap that exists between the rich and the poor. c. Improving the quality to improve the quality of life and the living standards of certain households in a given economy. d. To help rebalance the rebalance the economy at certain in the business cycle eg a global crises or a period of economic downturn.

Minimum wage when implemented effectively can have favourable effects on the economy. However what policies can we consider to be “ideal” or “perfect”? The policies that are set by the government will either make or break the economy’s labour force and the economy as a whole. I will be reviewing a number of different reviews in order to back up these claims throughout this body of work, whilst also clearly stating the key points of various already existing literature. Latin American regions (countries) where one of the first to implement a minimum wage and there is a lot of evidence that suggests that the minimum wage has been used to address poverty, try to improve the level of pay equity among workers, and also as a stabilization tool to try and tackle inflation.Theory behind the minimum wage:Figure 1 is a depiction of what happens in the labour market; i.e. it shows the relationship between real wage rates and the quantity of labour.

Figure shows us 2 curves the demand and supply curves of labour; an increase in the minimum wage will increase real wage rate in the economy. The point where the demand and supply of labour meet is shown in the above diagram as W0L0; This represents equilibrium employment or the “natural   rate of unemployment”.


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