If the employer cannot absorb the costs of the rising wage, they must make some tough choices about their business. Some of these choices maybe to lay off, reduce hiring, reduce hours, stricter hiring guidelines or simply raise product prices. It has been seen in the past that by raising minimum wage causes unemployment to increase. This is because if employers have to pay more for low skill level employees they are going to look for more skilled workers. This causes low skilled workers to become
J.C. Kincaid claims that "from the point of view of capitalism the low-wage sector helps to underpin and stabilize the whole structure of wages and the conditions of employment of the working class." Differentials in wages help to fragment the working-class; if wages were similar, greater unity and a single class-consciousness might be encouraged, with a possible threat to the capitalist class as a result. Kincaid states "It is not to be expected that any Government whose main concern is with the efficiency of a capitalist economy is going to take effective steps to abolish the low wage sector." Westergaard and Resler attack the idea that the welfare state has led to a more equitable redistribution of wealth. Payments to the poor are generally levied from the working classes.
Alternatively, the Government could introduce a free market supply side policy such as reducing the power of trades unions. If unions are powerful, productivity may be lower due to frequent strikes and disruptive working practises such as working to rule. If union power is reduced it helps reduce time lost to strikes, increases labour market flexibility and therefore should help increase UK exports. A third supply side policy could be increasing labour mobility. The nature of the UK housing market means that it is often difficult for workers to move to areas where jobs are available.
An economy of scale is the reduction in long-run average and marginal costs arising from an increase in size of an operating unit. It can be external or internal; external will increase the productivity of the industry and will result in a reduction of costs and internal is related to the shift in average production costs for a business as it boosts its overall product output and the average cost per unit falls until maximum efficiency is attained. Albatross could save money if they bought items in bulk but since they make items as orders are received, the items would sit in the warehouse and take up space that would be used quicker. It is very expensive to store raw materials because
Only those workers who are earning less than the minimum will be directly affected. The government believes that increasing the minimum wage will benefit the poor. It is true that some people will receive higher wages if the minimum wage rate is raised, but those receiving higher wages can only do so at the expense of others who will become unemployed. Minimum wage is a basic government-imposed price control. With the minimum wage price controls, a floor is set which indicates a minimum price that must be paid for certain goods or services.
Secondly high taxes create disincentives to work and this can be analysed through income and substitution effects. The substitute for work is leisure time and when taxes increase the opportunity cost for leisure time decreases, also people will have to work longer hours to earn the same post tax income causing disincentives as it reduces living standards as people must work longer and harder for the same incomes. This will create disincentives to work and so lead to a reduction in the labour force meaning less people in jobs and so less people paying income tax. Also as people earn less this way consumption in the economy falls therefore reducing the governments VAT recipts and corporate tax revenues and businesses make lower profits. This will lead to increases in the fiscal deficits as the government earns less and may be spending more in forms of social protection i.e.
The unions help organize and financially support the efforts of the workers to make more money. Meanwhile the conservative republicans continue to oppose raising the minimum wage citing the exact same concerns their forefathers did back in the 1930s. The reality is whether you support a minimum standard of living or not, the minimum wage as it stands is costing everyone. It drains resources from our economy by forcing workers to rely on public assistance and it cost companies too in the form of high turnover rates. When companies invest in their employees through higher wages and better benefits they realize significant savings through reduced employee
DISCUSSION: ❖ When companies outsource they nearly always save money, and are able if they want to reduce the prices of their products or keep them much lower than the competition. This hurts the small companies that can't outsource. ❖ Sometimes, it destroys the job of the local people here. Because it always costs less while outsourcing than hiring someone in US locally. Outsourcing has created extra 7% unemployment and the government has to pay unemployment benefits to them every month.
Scarce labor for skilled jobs tends to push up wages, coupled with the fact that skilled workers will revert to laboring jobs unless they are paid extra for the use of their skill. Secondly, the government and the trade unions have a hand in rate-fixing, as well as the employer. If the cost of living rises, the unions will call a strike for more pay, and they will always, in a free economy, press for not only a realistic wage level, but also a share in the profits of the firm, which are otherwise paid to the government in the form of taxation, to the shareholders as dividends, or reinvested back into the firm for development. The fact that in many countries, women are paid a lower rate for doing the same job merely indicates that, on the whole, most women are not union minded. They are relatively unorganized, because most of them are not the primary bread winner.