Answer:
The minimum wage is the lowest hourly rate that an employer can legally pay their employees.
Problems with the minimum wage:
Unemployment.
An increase in the minimum wage can cause firms to demand less labor and for more workers to enter the workforce. This would cause a rise in unemployment.
Previous history in the US and the UK shows that gradual increases in the minimum wage don’t cause a rise in unemployment.
To offset the cost of a higher minimum wage, other costs for employers could be reduced. For example, tax breaks or reduced regulatory burdens could be offered.
Sensitivity.
Labor-intensive industries, where labor costs are a high percentage of overall costs, are particularly sensitive to changes in the minimum wage. This can impact people like aged-care workers.
Industries vulnerable to increases in the minimum wage could receive targeted support to help them adjust to the higher wage costs. This could include increased government funding or tax breaks.
Regional variations.
Wages vary enormously in a large, diverse economy. The cost of living is also higher in large cities than in rural areas which makes setting the minimum wage challenging.
A regional minimum wage could be a good solution to the problem of regional variations in wages.
Higher wages are passed onto customers.
An increase in the minimum wage could cause firms to increase prices and pass the costs onto customers which causes inflationary pressure.
People get stuck on the minimum wage.
The minimum wage can encourage firms to keep more workers on the lowest band of wages.
Education and training can help workers move up the career ladder and earn higher wages. This could reduce the number of workers stuck on the minimum wage.
More illegal and undocumented workers.
Increases in the minimum wage will cause employers to look for ways to avoid declaring wages to the government and encourage black market activity and more illegal and undocumented workers.
The enforcement of minimum wage laws can ensure that workers are paid the correct amount. This can reduce the incentive for firms to find ways to avoid declaring wages to the government but offer cash-in-hand work in the unofficial/underground economy.
Step-by-step explanation: