Minimum wage simply means the lowest payment that an employer would pay the employee, which is call the "floor price". This minimum wage is enforced and controlled by the government. Why? Because the government assumes that if a laborer gets paid more then he or she would be more well off and will not be forced below the poverty line. On the other hand, Patrick Luciani's point of view differs considerably; he states that the policy of minimum wage will generate more unemployment and more people will fall below the poverty line. Luciani says that, "…earning minimum wage means poverty, pure and simple." (Luciani, p.31). The concept of supply and demand will clearly explain why minimum wage will cause unemployment. Also the social and economical side of the society will be affected greatly. So if the policy of minimum wage will not help the working poor what other policies or ways will help? Usually we assume that minimum wage is beneficial to the laborers but the truth is, it causes harm.
The government plays a key role in the ever-growing unemployment rate. The unemplyment rate caused by the government is called "Government-induced Unemployment". The government enforces this policy because it is nearly cost less and by setting a high minimum wage it gives an image that they are doing something worthy to protect and help the poor. Many of the government workers see this as a "quick fix" to a problem that needs more attention and will need a long term planing. It is a significant problem in Canada because studies show that the working poor consists of more than 50 percent of the poor. In 1988, Statistics Canada calculates that a family of four had to make at least 21,000 dollars, which is twice the amount of the minimum wage to not be classified as poor. The government usually sets the minimum wage above the level of demand and supply so therefore there would either be a shortage or a surplus.
The concept of demand and supply plays a large role in relating minimum wage and unemployment. For example, before the government set a minimum wage and the wage was 8 dollars per hour and the number of laborers employed was 8000, but if the government imposes a minimum wage of 10 dollars per hour there would only be 6000 laborers employed. So therefore there was a decrease of 2000 laborers employed which means there are 2000 people without jobs. (Refer to Appendix 1) In simple terms there is a surplus of people willing to work due to the high wage but more business are reluctant to hire due to the increase of wages and which causes "excess supply of labor".
In the economical perspective, business have ways of dealing with this policy, some of them are, to simply pay for the higher wage, start substituting capital and machinery in exchange for the higher labor cost, layoff some employees and less incentives for the employees. But in some cases some companies have to close down due to the overwhelming cost of labor. "Them minimum wage would then raise wages in the low-wage market without improving the quality of its labor. If the firms in question had been competing on even terms before the minimum wage law, they would now be at a disadvantage and might have to move out of the local labor market or go out of business." (Hamermesh, p.105) Also another way of avoiding the minimum wage would be to hire relatives and friends that would accept cash. This would skip the process of paying taxes and the cost of this will be transferred to the taxpayers.
In the social perspective, immigrants count on these jobs to train themselves and at least provide food and shelter for themselves and their family. This will not be attractive to immigrants immigrating to Canada for a new life. By eliminating training more and more people will rely on social assistance and again taxpayers will have to take the costs. Another issue would be useless jobs would be eliminated, jobs like security guards, salesperson and cleaning providers. People say that these jobs are not worth the minimum wage that they are paid for to do.
There are consequences to the minimum wage