Statutory minimum wage regulation was first introduced in New Zealand in 1894. Some attempt to control wages had been present since policymakers started believe that the market wages of labour was unfair to the workers. Minimum wage laws dictate a lowest hourly or monthly wage rate that employers may legally pay to workers. For instance, the Minionion government had set a new minimum wages rate of MS900 which intend to ensure that the basic needs of the workers and their families are met. Since that the growing debates over the imposition of minimum wage policy have become a very popular topic with examiners in recent year, therefore we may examine the effects of the minimum wage by looking at the theory behind it. Diagram1 shows a classical minimum wage set up in a competitive labour market. Like all other markets, competitive labour markets are modelled by the forces of supply and demand. In this case, workers determine the supply of labours and firms determine the demand of labour. The Minister of Human Resources, Mr Bananaa Yellow claimed that the new minimum wage (MS900) represented an average increase of 18.8% compare to the previous minimum wage (MS757.57), which affecting some 128,500 low-skilled workers in Minionland. But the diagram above illustrates that there will be a decrease in the quantity of from B to D, which resulting in a surplus of labour from D to C. This should make an intuitive sense that an increase of minimum wage raise the input costs of firm so that they are now less willing and able to hire more workers, while they are more people would like to have a job because of the higher wage rate. The exceed supply of labour includes both a reduction in employment (A to C) along with the second component consisting of workers who are drawn into the labour market by the prospect of earning higher minimum wage (D to B). In this case, raising minimum wages rate seems to be wrong as it only benefit some typical high-skilled workers but comes at...
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