Talks on Minimum Wage

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People tend to believe that government must fix the minimum wage level for any task, and they should increase the amount timely. We used to have various discussions when I was in college. We do study for years with a large amount of economic investment? And what we get? A job of 12 thousands salary per month? (around 15 thousands in discussion nowadays). It will take 3-4 yrs only to earn the spent money and do not know when to save the amount that was invested. Then whats the use of studying years spending hundred thousands of sum? Therefore the government must make the minimum wage/salary laws: this was what used to be the conclusions of most of the discussions.

But after my college, there have been more discussions about the minimum wage laws and increasing the amount. Unions organize various strikes for the issue, political parties supported the strike. Surya Nepal Private Limited had  to shut down the company permanently because of the strike organized by the unions. There are many other examples shut down of industries because of the disharmony between the employee and employer in Nepal.

I was just going through an article: Minimum Wage Laws: Sabotaging the Ladder of Economic Opportunity . I thought this is just the issue we go through many of the times, motivating me to write this content.

Anybody establishes a firm with the purpose of making profit and runs the firm to make better profit. The firm may be different, service may be different, strategy may be different, but the final motive is always making better and better profit may be in terms of money, share, goodwill or any other they believe to be profit. Every will be doing it, including me. And this particularly in not an offense. Every body have the right to make his living without coercing the right of other.

How does an employer hire employee? How does he pays?

The factor that matters to any businessman is profit. He does not bother to hire more and more workers until and unless he thinks he can make better profit from the hiring. Better profit may include the better working efficiency or the better efficiency to salary ratio. I believe nobody bothers to pay more if he can make more from him. The employer never hires men for $10 to have the output of $9.99 (just for an example), he would rather not perform the task. But I believe he would be pleased to pay $15 for the output of lets say $16, that makes him profit.

What’s bad in Minimum Wage and what’s good?

What’s good? Employee gets better salary for their job.

What’s bad? Employers get less attracted in hiring the manpower. Cut offs of job. Increase in work pressure. Unemployment increase. Unexperienced get lesser chances to get the first job. Production cost increase. Cost of the product increase.

What in my view :

Many high school students come to me and ask a question: Which subject has a better scope? Which subject shall I study and/or try to study? I generally answer: “There’s no relation in the subject you study and the altitude you reach after the study. The same study has made people earn 4 digit salary and the same study has made people earn 6 digit earning and this occurs regardless of the subject you study. What height you receive in your career depends on our own ability regardless of the study or profession you choose. Therefore, its better you choose your field of interest”. This however is not the answer I made myself. I know this because I had once the same question and had got similar answer.

Regarding the minimum wage: Its only the job of union leaders, so that they get an issue to get support of the existing labors and bargain management. Political parties favor them to get the votes. Of course increment of earning of workers in itself is good but what comes up along with it should never be blinded. While completing a cycle, I see no profit to the low income people themselves. Its just the numeric value increase not the living standard while completing a cycle. (Cycle: Minimum wage increase — cost of production increase —- cost of product increase — consume the product in increase price). Only the thing that happens in between is the Government collects higher tax and this is fruitful only for a corrupt leaders and government. I would better prefer in increasing the skills of an individual so as to be able to increase the earning.

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