Price Floor In Minimum Wage

In this case the wage is the price of labour and employees are the suppliers of labor and the company is the consumer of employees labour.

Price floor in minimum wage. For a price floor to be effective the minimum price has to be higher than the equilibrium price. But if minimum wage is set above market price employers may distribute more work among few workers and terminate rest of the workers in order to not to pay more wage to more workers. Minimum wage is the minimum legal amount an employer is. For example many governments intervene by establishing price floors to ensure that farmers make enough money by guaranteeing a minimum price that their goods can be sold for.

When the minimum wage is set above the equilibrium market price for. Legislating a minimum wage is commonly seen as an effective way of giving raises to low wage workers. For example the uk government set the price floor in the labor market for workers above the age of 25 at 7 83 per hour and for workers between the ages of 21 and 24 at 7 38 per hour. In the case of minimum wage employees are the suppliers of labor the good while businesses become the consumers.

Unfortunately it like any price floor creates a surplus. A price floor is the legal limit on how low a price may be set for a good. In modern western countries labor is the primary recipient of price floors 1 in particular the government imposes a minimum wage making it illegal for an employer to pay a worker less than a certain amount per hour. A good example of how price floors can harm the very people who are supposed to be helped by undermining economic cooperation is the minimum wage.

Minimum wage has been implemented in many countries over the past centuries with new zealand and australia at the forefront with the appearance of a minimum wage legislation in new zealand in 1894 and in the state of victoria in australia in 1896 labour 2012. Price floor has been found to be of great importance in the labour wage market. Minimum wage and unemployment. The most common example of a price floor is the minimum wage.

By observation it has been found that lower price floors are ineffective. Price floor is a situation when the price charged is more than or less than the equilibrium price determined by market forces of demand and supply. Minimum wage is an example of a government intervention in order to redistribute wealth through the use of a price floor. An example of a price floor is minimum wage laws where the government sets out the minimum hourly rate that can be paid for labour.

Setting price floor will obviously help few workers in getting.