What Prompts Changes in Minimum Wage?

The state of a country's economy and the general political climate tend to prompt changes in minimum wage laws for its labor force. Most developed countries have minimum wage laws that guarantee the lowest-paid workers a certain hourly rate. Typical goals of minimum wage laws are to establish a basic standard of living for the population and to eradicate poverty. Thus, when economic statistics seem to indicate that the standard of living is falling or poverty is increasing, adjusting the minimum wage is considered a suitable strategy to arrest these negative economic trends.

In every country, there are avid proponents for and against minimum wage laws. The minimum wage is a standard hot button topic. Pro-business advocates claim that a base pay rate stifles small businesses and prevents hiring, while pro-labor advocates insist on every worker's right to earn a living wage. Proposed changes in minimum wage laws tend to be a political issue that distinguishes the approach to poverty and workers rights between various political parties, but rarely do the differing political stances actually result in changes to the laws.

Changes in minimum wage laws happen infrequently, and are usually considered as a response to inflation and a decreasing standard of living. Inflation makes it more expensive for people to buy ordinary consumer products. If a country experiences a period of rising inflation, it may prompt a change in the minimum wage so the lowest-paid workers can continue to buy the same amount of goods and services, ultimately maintaining an equilibrium in the overall standard of living.

Governments closely monitor the status of the lower class as an indicator of the strength of the economy. For example, governments establish a poverty line that indicates how much a certain size family can earn and still be classified as living in poverty. If that poverty line cutoff rises for any reason, placing more of a country's population under the line, it indicates a decreasing standard of living. Changes in minimum wage laws can be considered a potential remedy.

Minimum wage laws exist on the national and local levels. For example, in the U.S., the federal government sets a national minimum wage, but each state can set its minimum wage at any point higher than the federal baseline. Consequently, the factors that may prompt national changes in minimum wage laws tend to differ from local factors. Local changes can be tied to a certain area's desire to be perceived as pro-business or pro-worker. The political influence of immigrant or minority populations that have higher numbers of low-wage workers, or the strength of a locality's unions or other labor force advocates can also be factors.