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why do we have a minimum wage

Minimum wages have been defined as the minimum amount of remuneration that an employer is required to pay wage earners for the work performed during a given period, which cannot be reduced by collective agreement or an individual contract. This definition refers to the binding nature of minimum wages, regardless of the method of fixing them. Minimum wages can be set by statute, decision of a competent authority, a wage board, a wage council, or by industrial or labour courts or tribunals. Minimum wages can also be set by giving the force of law to provisions of collective agreements. The purpose of minimum wages is to protect workers against unduly low pay. They help ensure a just and equitable share of the fruits of progress to all, and a minimum living wage to all who are employed and in need of such protection. Minimum wages can also be one element of a policy to overcome poverty and reduce inequality, including those between men and women, by promoting the right to equal remuneration for work of equal value. Minimum wage systems should not be seen or used in isolation, but should be designed in a way to supplement and reinforce other social and employment policies. Several types of measures can be used to tackle income and labour market inequality, including pro-employment policies, social transfers, and creating an enabling environment for sustainable enterprises. The purpose of a minimum wage, which sets a floor, should also be distinguished from collective bargaining, which can be used to set wages above an existing floor.

Figure 1 shows a hypothetical wage distribution with a minimum wage zone and a collective bargaining zone which can be used to establish minimum standards and to set wages above an existing floor. Figure 2 illustrates that the effectiveness of minimum wages depends on many factors, including the extent to which they afford protection to all workers in an employment relationship, including women, and youth and migrant workers, regardless of their contractual arrangements, as well as all industries and occupations in the economy (coverage); whether they are set and adjusted at an adequate level that covers the needs of workers and their families, while taking into account economic factors (level); and whether employers comply with minimum wage regulations (compliance). Figure 1. The distribution of wages (hypothetical wage distribution of a population of 56 wage-earners)
How to read this figure : Figure 1 shows a hypothetical wage distribution of a population of 56 wage-earners before the introduction of a minimum wage. The level of wages is on the horizontal axis, and the number of wage earners is on the vertical axis. We see the full range of market wages, including a relatively small proportion of workers with extremely low pay on the left end of the wage distribution. For example, 1 employee has a wage of 1$, 2 employees are paid 3$, while 5 employees receive wages of 8$. The yellow circle called the minimum wage zone shows that a minimum wage should in principle remain targeted at the lowest-paid employees, to eliminate unduly low pay ; the blue circle is the collective bargaining zone and illustrates the principle that collective bargaining can be used to set wages above an existing floor.

Figure 2. Main dimensions of effective minimum wages ILO: General Survey concerning the Minimum Wage Fixing Convention, 1970 (No. 131), and the,. The national minimum wage was created by Congress under the (FLSA) in 1938. Article I, Section 8 of the FLSA was a comprehensive federal scheme which provided for minimum wages, overtime pay, record keeping requirements, and. The purpose of the minimum wage was to stabilize the post-depression economy and protect the workers in the labor force. The minimum wage was designed to create a minimum standard of living to protect the health and well-being of employees. Others have argued that the primary purpose was to aid the lowest paid of the nation's working population, those who lacked sufficient bargaining power to secure for themselves a minimum subsistence wage. FLSA specifically provided for a minimum wage for full time and part time, public and private sector workers. Specifically, workers who are Бengaged inБ or Бin the production of goods forБ interstate (commerce between the states) and foreign commerce. FLSA's requirements only apply to Бemployees. Б To determine whether an individual is an employee under the FLSA, courts usually focus on the economic reality of the relationship. The important issue is whether the individual is Бeconomically dependentБ on the business to which the employee renders service.

Courts also look at a variety of factors that are similar to those used in the common law context to differentiate employees from independent contractors. For example, courts will look at the degree of control the alleged employer has over the way in which the work is performed - typically an employer will have more of a degree of control over an employee, compared to the degree of control that an employer would have over an independent contractor. Congress exempted certain employees from the minimum wage provisions, for example: executives, administrators, professionals, and outside salespersons. It is likely that Congress believed that these employees had a higher level of bargaining power and were not as vulnerable to overreaching by their employers. Other workers with disabilities or full-time students. he Secretary of Labor to use several different methods to evaluate an employer's conduct and enforce the minimum wage requirement. Congress created the Wage and Hour Division in the Labor Department to allow the Wage-Hour Administrator and the Secretary to investigate and detect violations. The Wage and Hour Division can compel the attendance of witnesses at hearings. It may also require an employer to make records available to the Wage-Hour Administrator. Additionally, the Secretary can sue to restrain violations and to some extent recover unpaid benefits on behalf of employees. For more on minimum wage, see this this, and this

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