Answer to Question #322519 in Management for Sourav

Question

what are the draw backs of national wage or minimum wage

Answer 1

A minimum wage is a legal minimum for workers. It means workers are guaranteed a certain hourly wage helping to reduce relative poverty. However, a minimum wage could have potential disadvantages in particular, there is the risk of creating unemployment as firms cannot afford to employ workers. A minimum wage can cause cost-push inflation. This is because firms face an increase in costs which are likely to be passed on to consumers. This is even more likely if wage differentials are maintained.