Monday, January 24, 2011

Free Market Economics Versus The Minimum Wage



The minimum wage, or the lowest possible rate at which a worker is paid, is a staple feature of all developed countries. A majority regard this law as an offspring of a greater sense of social responsibility among the big players in a national economy. However, more than just philosophical ideals, any law or proposal should also be subject to scrutiny in as far as its financial or economic feasibility.
Globalization, the process by which the whole world has become interconnected has now reached its peak. Western companies, in the face of increased competition from the outside, are now finding ways to enhance their global competitiveness by minimizing the prime factor that dictates business viability - operation costs.
Today, the global phenomenon of business process outsourcing has taken the front seat. Basically, companies contract labor from outside their companies to do some of their business processes to cut down on capital outlay. Initially, outsourcing was a domestic affair. However, with the advent of the Internet, it has now crossed national borders.

Download Exam Drill of Economics for Senior High School



The outsourcing phenomenon has caused countless headaches to many developed countries. In the United States for example, hundreds of thousands of customer service jobs were lost with the development of VoIP (Voice over Internet Protocol), a telephone system that makes international calls cost almost the same as local calls. These jobs were moved to offshore locations like Panama, India and the Philippines, as a company can simply pay a foreign representative a tenth of what they would at home.
Even writing jobs, accounting, legal, and pretty much everything else that does not need on-site service can be outsourced offshore. With the existence and strict implementation of the minimum wage law in most countries, local businesses find it difficult to reconcile business needs with government policy. However, a total repeal of the law will expose the average salaried worker to labor abuses that warranted the law's existence to begin with.
With this paradox, is the Minimum Wage Law in need of drastic revisions?
Probably, but it would take one heck of Nobel laureate to find the perfect answer.
For one, the concept of a minimum wage has become deeply ingrained in the consciousness of the average person. However, this leads many multinationals to move jobs overseas in search of cheaper labour.



0 comments:

  © Blogger template by State Universities

Back to TOP