Microeconomics Ll

Topics: Minimum wage, Employment, Wage Pages: 6 (1951 words) Published: May 2, 2013

Examine the possible effects of implementing a minimum wage in Malaysia from a microeconomic perspective.


Minimum wages has always been a worldwide topic that is constantly argued in many countries. It has always been argued that once minimum wages is applied, there would not be enough competition among workers in the country. As a result, an important question had been brought out; who will benefits when the minimum wage rises? How is the distribution of income for poor families, and the high income interest ladder?


The minimum wage is a must meet or it must exceed all employment contracts stated for the employees. The wage levels under the Fair Labor Standards Act contained that minimum wage changes from time to time in order to adjust to the high prices from individual economic units; such as single-parent families, businesses or personal micro-finance issues. From the microeconomics view, the minimum wage would produce positive and negative impacts on enterprises, individuals (workers), and families of those earning the minimum wage rate.

The effect of minimum wage on workers

In the perspective of job motivation, with minimum wage, low-skilled workers do not know what to expect when they are out looking for a job. Job searching efforts could offset whereby; they would accept low-wage offer, as a result, it would be more conducive to low-skilled workers. Hence with the minimum wage rate,these workers would not consider to depend on the public assistance income, and would be actively looking for employment because the public income assistance offered by the NGO (Non Government Organization) is relatively low.As a result, more individuals would stop applying or depending on public assistance.

Secondly, the creation of employment opportunities would then be low. This is because of, "the instability of the economy and sometimes to avoid hiring new workers which is caused by the minimum wage rate", according to the article published by the National Center for Policy Analysis on the negative impact of the minimum wage rate. Employers would then be willing to pay for existing staffs' working hours, staff cost ratio, and the minimum wage employment. This would then make it more difficult to find a job in a bad economy where minimum wage is implied.

On the other hand, morale effects would also affect workers because when a country decides to apply the minimum wage, it would affect all the country's' current employees minimum wage rate. According to the full impact on the measurement of the post, against money, the minimum living wage law and in the sense that the amplifier is slightly higher than the minimum wage, employees would feel that it is not fair. The decrease in wages for employees that are receiving the minimum wage in a company, especially when there's nobody that gets a raise in salary, the company would face a crisis whereby its workers would leave the company to look for a better pay.

The effects of minimum wage on enterprise

Commonly encountered by enterprises that relies heavily on unskilled labor, substantial increase in the minimum wage virtually eliminates the ability to negotiate the lowest level of wage and salary income. According to the Malaysian Department of Labor in 2003 and 2013, the minimum wage increased by 100%, from RM3.50 to RM7.00 per hour. Profits and expenses must be regulated to increase the employment of unskilled workers. This is because, economic decision-making and the introduction of new variables with motivated workers would result in high economic growth.

Out of all the businesses in Malaysia, more than 60% are small businesses. Therefore, the economy consists mainly by small businesses and all the operating costs of enterprises, wages and benefits, including the largest part, is the only have one controllable costs. With government regulations, small businesses must pay employees minimum wages and with the rise of...
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