The paper ought to examine the different perspective and effects concerning the reduction of poverty with the aid of the legislative policy tool of controlling vis-a-vis increasing the minimum wage. As can be extracted from the trends of economics along with the various experiences that the global economy has been experiencing, the legislation concerning minimum wage affects the relocation of income to workers who only receive low wages.
This policy tool can help in assuring workers to receive a higher minimum wage which would obviously create or result to higher family income to these workers. The policy was utilized and devised mainly to help the third world countries to compete in the Global market (Katel, 2005). On the other hand, there have been proposals and issues in Central America, regarding this matter. There are even suggestions to further reduce the minimum wage or even eliminate it if possible in order to provide a more competitive and flexible market (Latin America and Caribbean Center, 2007).
This paper would look at this argument and apply it in the complex situation of Honduras economy where in self employed individuals and those who are considered as civil servants are not affected by minimum wage changes. The difference between the minimum wage in Honduras and in first world economies such as the United States and countries in Europe would also be discussed. The presentation of available data’s concerning the differences in minimum wages in these countries shall bring fort other factors which affects the consequences of setting minimum wages in different countries (Gindling & Terrell, 2006, page 4-5).
The paper would further discuss the difference between countries economies in order to create a better view on the relation of globalization and global competition to the wages and labor conditions of countries, focusing on its relative effects in Honduras and the United States. The paper would also have a reflection on the studies made by Gindling and Terrell (2007, page 4-5) showing that minimum wage legislation has not reduce the poverty level in Honduras.
The discussions in this paper shall be related to the theoretical models, surveys and data’s that have been collected as of June 2007. The Minimum Wage: The New Deal Strategy There have been several ongoing debates concerning the utility of the legislation of minimum wage. Those who believe that minimum wage would reduce poverty argued that, the regulation would only be effective and would only concern those who are in the formal sectors, thus, it does not or it is not meant to guarantee any positive impact on the people who are working in the informal sector (Lee, 2002, page 1).
Those who argue against minimum wage believe that the close competition that exists today in the global market would require governments to create an attractive business milieu for investors as much as possible. This would mean that most government, especially those who are considered as “developing countries” would impose lower minimum wages or would even consider its abolition. (Lee, 2002, page 1) Briefly, the minimum wage is a legislated law that controls the minimum amount of payment that a worker shall receive for his/her performance.
Minimum wage legislation are created in order to protect the low-wage workers from possible exploitation, since these workers are usually unskilled laborers and mostly uneducated or have little education (Katel, 2005). Upon insuring that these workers would be guaranteed with a minimum wage, poverty would also be alleviated or avoided. In setting minimum wage, the person’s daily living standards and the purchasing power are computed, to ensure that it would be economically beneficial and fair for the workers (Lee, 2002, page 1).
The development of minimum wage laws started in most first world countries, such as New Zealand and Great Britain. In United States, it started on 1937 when it was proposed by President Roosevelt as a legislative tool that shall reduce or eliminate any possible exploitation of the economic class who has been defenseless since they are in an unequal position with the higher class (Katel, 2005). The law aims to protect the health and well-being of the working class.
This was popularly known as the “New Deal Strategy” which shall remedy the effects of the Great Depression. The approved minimum wage during those times was $. 25 per hour. (Katel, 2005) Yet the opponents of this law appeal that minimum wage would definitely heightens the poverty that are being experience especially by the low-wage workers. As more and more of this workers are laid off from their jobs because companies are taking cost-cutting measures to answer the increase in minimum wages.