Minimum Wage in the United States and Japan: Difference between revisions

From Dickinson College Wiki
Jump to navigationJump to search
← Older editNewer edit →
Line 214: Line 214:
2.3 Minimum wage, unemployment and growth - Under certain conditions, positive effect on employment in the long run.
2.3 Minimum wage, unemployment and growth - Under certain conditions, positive effect on employment in the long run.


===Minimum Wage Economists===
==Minimum Wage Economists==
'''Raise Minimum Wage'''
'''Raise Minimum Wage'''
*David Card  
*David Card  

Revision as of 15:12, 30 November 2006

History of Minimum Wage

United States

  • First created in 1933 with the National Industrial Recovery Act
  • The NIRA was deemed unconstitutional by the Supreme Court in 1935 and the minimum wage was not reinstated again until 1938, with the Fair Labor Standards Act(FLSA)
  • Increased gradually by the government until its current level at $5.15/hour

http://www.cnn.com/US/9608/20/minimum.wage.sign/graph_mimimum.wage.gif

  • President Clinton created the ability of states to increase their own minimum wages above the federal one - more than a third of the states have taken advantage of this opportunity
  • Variance on the set minimum wage can go down to the level of county or city

Japan

  • First introduced a minimum wage law in 1947, but it was not codified until 1959
  • Employers are required to enter their employees for eligibility in such programs as "health insurance, employee pension insurance, employment insurance, and workers' accident compensation insurance" - www.photius.com
  • The levels are set specific to area and specialty by groups with representatives from the government, employees, and employers

Minimum Wage Definition and Examples

---United States---

Minimum Wage
  • the minimum hourly, daily or monthly wage that must be paid to employees or workers. Each country sets its own minimum wage laws and regulations, and more than 90% of all countries have some kind of minimum wage legislation. (according to wikipedia)
(the federal minimum wage)
  • Determined by the Fair Labor Standards Act.
  • $5.15 per hour since 1997
(minimum wage of each state)
  • The State law excludes from coverage any employment that is subject to the Federal Fair Labor Standards Act.

http://seattlepi.nwsource.com/dayart/20050415/Minimum-wage-0415.gif



PA minimum wage ($5.15 )
  • this will increase to $6.25 on January 1, 2007 and to $7.15 on July 1, 2007
  • According to the Pennsylvania Dept of Labor and Industry, 257,000 or 7.9 % of the Pennsylvania’s hourly workforce would benefit from a one dollar per hour increase in the state’s minimum wage. 528,000 Pennsylvanians or 16.3 % of the state’s workforce would benefit from a two dollar per hour increase in the state’s minimum wage


"Increase in other states other than PA"
  • Arizona (no state minimum wage to $6.75 on January 1, 2007)
  • California ($6.75 to $7.50 in 2007 and to $8.00 on January 1, 2008)
  • Colorado ($5.15 to $6.85 on January 1, 2007)
  • Hawaii($6.75 to $7.25)

http://www.epinet.org/issuebriefs/228/table1.jpg



[Exceptions]
Waitress/Waiter
  • $2.13 an hour in direct wages
  • $2.83 an hour in Pennsylvania
  • $2.63 an hour in Massachusetts
For workers under age 20
  • may be paid $4.25 an hour for their first 90 days consecutive calendar days of employment with an employer. After 90 consecutive days of employment or the employee reaches 20 years of age, whichever comes first, the employee must receive a minimum wage of $5.15 per hour.

---Japan---

http://www.travel.megatonloh.com/hotels/image/map_japan.gif


  • Minimum wages in Japan are determined by the Minister of Labor or the Chief of the Prefectural Labor Standards Office in 1959, and adjusted taking into consideration changes in economic and other affairs, as recommended by the Minimum Wage Council. Those systems vary with each region in Japan. It changes each year.


2 minimum wage systems
1)Regional
  • applies to all workers
  • 5.10~5.90 dollars/ hour (120yen/dollar)
  • minimum wage in big cities
2)Industry
  • applies to all workers in a specific industry throughout Japan, and the minimum wages vary

with the quality of jobs

  • it is set when the specific industry needs to be higher than regional minimum wage for the fairness of labor
  • 5.10~6.70 dollars/ hour
  • the category of Industry

--the steel industry, Publishing, Auto (car) industry, Mechanical industry

Whom does minimum wage apply?

United States

Apply

  • $500,000 or more in annual sales
  • Employees work in what Congress calls "interstate commerce" (commerce between states)
For example,
  • Making phone calls to or from another state
  • Sending mail out of state
  • Handling goods that have come from or will go to another state

Not apply

  • independent contractors (only employees are entitled to the minimum wage)
  • outside salespeople (a salesperson who works a route, for example)
  • workers on small farms
  • switchboard operators employed by phone companies with no more than 750 stations
  • employees of seasonal amusement or recreational businesses
  • employees of local newspapers having a circulation of less than 4,000
  • newspaper deliverers, and apprentices, students, and learners, as defined by federal law.

Japan

Apply

Region
  • applies to all workers in each region
  • including part-time job
Industry
  • applies to all workers of a specific industry in each region
  • does not apply to workers below 18 years old and above 65 years old

United States and Japan Enforcement Laws

United States

Who regulates?
  • Department of Labor's Wage and Hour Division
What is regulated?
  • Minimum Wage
  • Overtime
  • Child Labor Standards
  • Record Keeping
How are regulations maintained?
  • Submitting of Records
Consequences
  • Fines not exceeding $10,000 per violation

Japan

Who regulates?
  • Ministry of Labour (Korosho)
What is regulated?
  • Same as United States
How are regulations maintained?
  • Inspections in December and Springtime
  • Submitting Records
Consequences
  • Fine not exceeding 10,000 yen = 83 dollars(120 yen/dollar)

United States's vs Japan's Minimum Wage

United States's/Japan's Advantages

  • Benefits for working families
  • Benefits for disadvantaged workers
  • Help reserve the trend of declining real wages for workers
  • Strategy to end poverty
  • Low public and social costs
  • Decreases chance of abuse of employees
  • Increases consumption with the placement of an higher income in the lower class, which most or all of their income
  • Creates a higher standard for workers because employers require better work in turn for the increased money

Description

United States's/Japan's Disadvantages

  • Reduction in labor hours and/or employment
  • Reduce profits
  • Raise prices
  • Reduces benefits provided by employer
  • Attracts immigrants from low wage countries
  • Reduces ability of poorer workers to better themselves with education
  • Raises monetary burden on government because of an increased amount of people without jobs
  • Nation loses ability to compete in global market because of increased costs in other areas of production

Description

The Economics

Supply and Demand Model

Description

  • Key:
  • Wm: minimum wage
  • Wc: equilibrium wage
  • Nm: demand for labour if the MW is set up above the equilibrium wage
  • Nc: demand for labour at the equilibrium wage


Economic model/theory and the predicted effects on minimum wage on employment/unemployment

1. Standard competitive model

1.1 The supply-demand model - negative effect on employment if minimum wage is set above the quilibrium level (market clearing wage).

1.2 Two-sectors model - Depends on: (i) the elasticity of labour supply to wages, (ii) the reservation wage of those who do not obtain job in the covered sector, (iii) the relative size of the covered sector.

1.3 Two-sectors model with queuing for covered-sector jobs - Effect on unemployment depends on: (i) the elasticity of the activity-rate vis à vis MW as well as change in employment-rate.

2. Alternative models

2.1 Monopsonistic market - Positive effect on employment in case of small increase in MW.

2.2 The efficiency-wage theory - There might be a positive effect on employment.

2.3 Minimum wage, unemployment and growth - Under certain conditions, positive effect on employment in the long run.

Minimum Wage Economists

Raise Minimum Wage

  • David Card
  • Alan Kruegar
  • Used phone surveys of fast food restuarants to prove the demand for low wage workers would be inelastic

Oppose Raising Minimum Wage

  • David Neumark of Michigan State
  • William Wascher of the Federal Reserve Board
  • Neumark and Wascher used payroll records from New Jersey and Pennsylvania resturants to prove Card and Kruegar were wrong and employment had fallen
  • Kevin Murphy of the University of Chicago
  • Donald Deere and Finis Welch of Texas A&M
  • Murphy, Deere and Welch used the economic model and common sense when opposing the raise of the minimum wage

Flaws

  • Card and Kruegar used single franchise resturants
  • Neumark and Wascher were given bias answers because resturants were aware of the studies

WORKCITED

On the page of "Minimum Wage and Examples"
Retrieved from "https://wiki.dickinson.edu/index.php?title=Minimum_Wage_in_the_United_States_and_Japan&oldid=16550"