An overly generous wage may prompt employers to cut jobs
Piyaporn Sodsriwiboon and Gabriel Srour
ALMOST EVERY COUNTRY has a minimum wage. The details vary: some countries, such as France, fix a universal minimum across the economy, while others, such as New Zealand and South Africa, differentiate between sectors and types of workers. Typically, the minimum wage is set by the government and revised periodically in consultation with business and labor organizations (see chart).
Minimum wages have been justified on moral, social, and economic grounds. But the overarching objective is to boost incomes and improve the welfare of workers at the low end of the ladder, while also reducing inequality and promoting social inclusiveness. Critics counter that rather than improving welfare, minimum wages are counterproductive because they disrupt the market for labor. They argue that there are other, better-targeted, and less distortionary ways to provide social assistance.