A minimum wage is the lowest amount which can legally be paid to a worker for one hour of work, in any job.
Minimum wage legislation is passed by the government of a country in order to ensure that all workers receive a fair wage for the work they complete and to raise the income of the lowest paid workers.
Whilst minimum wage legislation is good for workers in low-paid jobs, it can be argued that minimum wage could lead to job losses as it increases the labour cost for firms.
On the other hand, economic theory suggests that when workers receive a higher wage, they will be more motivated in their work and thus contribute more to the firms total output, raising revenue for the firm and covering any increase in labour costs.
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Key terms:
Income – money which is received for completion of work or through investments.
Legislation – laws which are passed by the government.
Revenue – the money that a firm earns through the sale of their good or service.