Origins and History

• The idea of minimum wage is tied to the concept of equity in income distribution. It is a way of accomplishing a fair allocation of income by reorganizing and establishing the wage structure through legislation. The first attempt at legislating wages was in 1896 in New Zealand. No minimum wage was yet defined at this time. Instead, structures for mediating labor conflicts were created. It was not until 1907 in Australia that a minimum wage was actually first defined by law. Throughout the history of minimum wage laws, the rules set were often narrow in scope. They applied to only particular sectors of the economy or particular groups of workers.
  
  In 1912 in the United States, for example, minimum wages were only set for women and children, and this was only done by the state of Massachusetts. In 1938 the U.S. government finally enacted minimum wage laws that had a national scope. The concepts of minimum wage and minimum wage laws are actually quite recent. Industrialized countries of Europe and North America established theirs in the 20th century. In Asia, the People's Republic of China only established their first minimum wage law in March 2004.
  
  

Actors

• In a capitalist system of economy, there are generally three major actors or groups that are involved in the establishment of minimum wage laws. There is the government who will write, enact and enforce the laws. The second main group comes from the business sector. This is usually composed of business owners organized in employer associations. The third group comes from the labor sector and this is composed of labor unions and larger associations of the same.
  
  These three actors will commonly carry out their negotiations within the structure of a tripartite system, often centralized in an institution such as a wage board or council whose members would be representatives of the three main groups. Any agreed-upon proposals or changes to the minimum wage would then be passed on to the legislative bodies of government and/or other pertinent government agencies such as a department of labor and employment.
  
  

Detractors

• Those who oppose the concept of minimum wage often use classical economic models to point out that establishing a minimum wage will lead to unemployment. Treating labor as a commodity and wages as its price, establishing a high minimum wage would in effect lessen the demand (employers will hire fewer workers) and increase the supply (more workers without jobs).
  
  

Supporters

• Those who advocate the principle of minimum wage, on the other hand, criticize the classical economic view of labor by stating there is already an imperfect competition between employers and workers. Since there are more workers (those who sell their labor) than employers (those who buy labor), employers actually have the advantage of making any demands on workers such as paying low wages. A minimum wage law would be one way to even the playing field.
  
  

Informal Minimum Wage

• Not all countries have minimum wage laws. In countries that do have them, it's possible that not all sectors of the economy are covered. Self-employed workers, service workers and agricultural workers, for example, are possible sectors that are not included in the rules for minimum wage. In such cases, a minimum wage may still be established but, instead of formal state laws, they could be set through customs or through non-legal pressure, possibly from unions or social and civic organizations.