Minimum Wage Analysis

In this days it is customary for countries to set a minimum wage for the labor market, this is a minimum amount that the employer can pay to the worker, this is a bottom limit to set the salary of each employee. Governments set this minimum wage determining the minimum income a worker can perceive or which is the lowest amount a company can pay their workers, this in order to try to regulate the labor market so employees do not become underpaid or companies’ abuse workers from their dominant position. But this minimum wage also has downgrades, as it can foment underemployment, informality or unemployment since the minimum wage could be higher than companies are willing to pay as such it needed to consider alternatives. Nonetheless, although

This alternative is appreciated in Knabe & Schöb (2011) study in which they indicate that some Europe countries use a mixture of minimum weight and subside in order to minimize the negative side effects of minimum wages even so they determine that in Germany it would be more beneficial, from a quantity of employment view, to subsidize in some way the labor market, correspondingly this option wouldn’t signify more fiscal cost for the country. Moreover this is an important option from the perspective of the government and the company, for the reason that, for the first one, they reach their goal of giving people essential means for a decent life, and for the last one, the subsidize option would at least reduce, or even cancel, the excess cost of production for a high labor wage due to the minimum limit

Although minimum wage secures a salary that should secure a decent life for employees it also comes with a decrease in overall employment, so in some way it doesn’t help all the low-level employment since some get unemployed, this event is particular observed in Peru. As such it is necessary for governments to implement alternatives that could suppress the bad effects of minimum wage among them subsidies or increment the education of the low-level employees, this last option could be done in the long run. Finally, even with the adverse effect that brings minimum wage, nowadays is the best way to regulate the labor market in this low-skill segment, especially from a short-term point of