For centuries, there has been a mounting debate as to the rejection or acceptance of the efficacy of the minimum wage law as a social protection measure. The common observation is that no matter what economists say about the adverse effects of the legal minimum wage to employment and to the entire economy, there is a growing number of countries that are implementing the minimum wage law.
There are societies from different parts of the world that continue to use or have even just started implementing the minimum wage. For instance, Germany did not have a national minimum wage before, and it introduced this to their system in 2015. The Conservative Government in the UK set the increase of the minimum wage of adults to 60 percent of the median wage in 2020 (from 50 percent in 2018). Some cities in the USA passed the legislation for a $15 minimum wage.
Ancient philosophers like Aristotle held that properly earned income is essential to self-sufficiency within the society. Maintaining a household is the beginning of the economy. The medieval philosopher and theologian Saint Thomas Aquinas contends that the just wage is not fixed with mathematical precision but depends on a kind estimate.
Minimum wage regulation was first developed in New Zealand in 1894, then in Australia in 1896, and then in the United Kingdom in 1909. In Argentina, the Home-Work Act was done in 1918 with a view to protecting low paid home-workers, while in Sri Lanka, the Minimum Wage Ordinance was enacted in 1927. The USA enacted the Fair Labor Standards Act in 1938 that established the minimum wage.
Coined in the 1800s, minimum wage aimed at putting an end to “sweating,” which was common in the UK and in the USA at the early part of the 20th century as an offshoot of massive industrialization. Hence, two economists were mostly cited for their pioneering scholarly work on labor economics and the concept of the minimum wage. In the UK, Webb advocated the need for a “minima” on wages to alleviate the conditions in the “sweated trades,” where workers barely made both ends meet with low wages, unsanitary working conditions, and excessively long hours of work. In the US, John R. Commons pioneered labor economics and influenced a broad range of legislation in the first half of the 20th century in many aspects of American labor, such as apprenticeship, vocational education, and workers’ compensation.
At the outset, the legal minimum wage was considered as a temporary relief, and it faced many challenges and criticisms along the way. The implementation of the minimum wage law expanded to more industries after WWII, and the United States was a glaring example of the adoption and expansion of the minimum wage. International Labor Organization Convention No. 131, also known as the Minimum Wage Fixing Convention of 1970, takes special reference to minimum wage fixing in developing countries.
The intellectual and economic dynamics during the 1970s and 1980s brought the expansion of minimum wage law to a standstill in some countries, such as the abolition of the wage council in the United Kingdom in the 1980s. Research on the adverse effect of the minimum wage on teenage and youth employment summed up the sentiments against the statutory minimum wage during this decade.
The 1990s sparked a renewed interest in the minimum wage as a measure to address poverty and inequality. There was research demonstrating that an increase in minimum wage raised the income of low-paid workers, and that there was no evidence that it reduced employment. Amid criticisms by some economists, such findings spurred a renewed interest on the impact of the minimum wages and made researchers rethink their methods and use of data in presenting criticisms on the minimum wage theory. On the other hand, there has been research suggesting that the minimum wage does not reduce poverty, but rather redistributes incomes among low-income families, which may just increase poverty in the process.
In conclusion, the minimum wage debate is still going on, and no one seems to be the winner yet. History has shown that the issue of just wages, or minimum wages for that matter, is a long-standing social issue. Economists say that wage determination is a free and mutual agreement between labor and enterprise, but society says that mutual agreement is not enough. Mutual agreement as a moral yardstick is not enough to meet the standard that has existed for a long time—that no one ought to be poor.
So, can society wait as to who will win the minimum wage debate, or has it already taken the minimum wage as the closest proxy to just wage?
Ms. Ruby A. Badilles is a graduate student at the Department of Economics of Ateneo de Manila University.
