However, it remains to be a poor country, being the fourth of the poorest Central American countries. From the same data’s provided by the PHMSP about 44% of the labor force of Honduras is considered to belong in the “extremely” poor line. This means that they don’t even meet the 1, 200 calories per day requirement for standard living. 63% of the labor population is considered as poor, meaning only about 37% of the working class is considered to belong above the poverty line (Gindling & Terrell, 2006 pages 5-9).
According to the data’s, 46% of those who works in small firms belongs to extreme poverty while 51% of the self-employed individuals also belong to the extreme poverty line. The unskilled workers amount to 49% or almost two-thirds of the labor force. 50% of the workers are young individuals with age ranging from fifteen to twenty-one. 62% came from the rural areas (Gindling & Terrell, 2006 pages 5-9). Discussion of the relationship of Poverty and Minimum wage in Honduras As far as the data’s reflect, the constant raise of minimum wage I Honduras does not affect the person which belongs in the poverty line.
Instead of solving poverty, the raise in minimum wage is seen to have a relative relationship with poverty in the case of Honduras (Gindling & Terrell, 2006 page 22-23). The difference between the minimum wage set in the United States and in Honduras lies on the fact that those who earn the minimum wage in the United States belongs to those people who are in the poverty line while those who earn the minimum wage in Honduras mostly belongs to the middle class(Gindling & Terrell, 2006 page 4-5). Also, the number of family members must also be considered.
While in United States, the usual number of family members is four to five, in Honduras it is about 6 to 8. This greatly affects the amount of standard living difference between Honduras and the United States (Gindling & Terrell, 2004 pages 10-14). Minimum Wage versus Distribution of Wages In the study made by Gindling and Terrell in 2006, they have found out that an increase in the minimum wage would result to an increase in the average wage of the large firms. However, an increase in minimum wage also increases in the laying off or cost cutting process.
The study proves that when the company reduces the number of employees, the workers becomes either unemployed or would work in small firm business. Such evidences suggest that increasing the legal minimum wage is tantamount to an increase in the employment in smaller firms (Gindling & Terrell, 2004, page 6-9). If such would be the case, there would be more workers who are willing to work for smaller wages, since smaller firms is not included in the minimum wage law. Thus, there is a possibility that the wages would be reduced in the smaller firms, making a lot more workers work for low wages that later on creates more poverty.
The possibility of increasing the amount of minimum wage in Honduras remains very low, with most people working below the poverty line. This only means that the workers who would receive the increase in minimum wage are only a small portion of the working force (Gindling & Terrell, 2004 page 17). With the possibility of employment reduction upon the implementation of the said increase, there would be a lot more people who would be cut out of job in the near future. The working conditions of the workers are not any better. It means that most of the workers might suffer health problems due to long hours of works and poor working environment.
In addition to this, those workers who would be left behind when lay offs happen would need to work longer hours or would be task to do more jobs (Honduras. com, 2007). If these things happen, it is impossible for the people to maintain their health. They would have more problems and more expenses. Those who are unemployed would either risk illegal migration or settle for much lower paying jobs that they could find. Children would also be forced to work and possibly drop out of school, increasing the number of unskilled and less educated people and future workers.
Children are force to accept low wages since they are not in any position to complain, after all what they are doing is illegal and their minds are set to follow the instruction of higher ups especially older people (Katel, 2005). It is possible to increase minimum wage even presented with all this risk and loop holes after all, minimum wages in Honduras have been open to changes on about 22 times already. Raising the minimum wage of about 5-10% would not have a great impact as the data’s above presented. When it will be higher than this it would be detrimental in the economy as a whole (Gindling & Terrell, 2004).