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Posted on June 20th, 2012, by

The practice of legal regulation of the minimum wage has a long history. It emerged in 1896 in Australia, where special councils were empowered to set a fair minimum wage for all industries. Then the laws on minimum wages were adopted in the UK (1909), France (1915), Austria (1918), Germany (1923) and other European countries.  (Euraud  & Saget, 2005)

In 1917, in the Federal Mexican Constitution (Article 123) was noted that a minimum wage of a worker – the head of household – must be adequate to meet the conditions of living in each region to ensure normal living conditions, education and leisure. Later this practice was summarized by experts of the International Labour Organization (ILO) and in 1928 was adopted the ILO Convention #26 On the Minimum wage for workers in manufacturing and trade.

Later it was revised and updated, and ILO Convention N131 On the Minimum Wage Fixing, with Special Reference to Developing Countries (1970) is considered as the main document on minimum wages.

In accordance with international standards, minimum wage is considered as the lower limit, which must guarantee  the satisfaction of basic life needs a worker and family. Currently, national minimum wage exists in many countries: USA, UK, France, Spain, Canada, Belgium, Portugal, New Zealand and Australia.

The definition of minimum necessities for citizens depends largely on the socio-economic situation of the country. In modern international practice are used two approaches to setting minimum wages. The first is based on the definition of minimum requirements that must be met to sustain life. This is so-called market basket of essential goods and services in monetary terms. The second approach assumes that the guaranteed minimum level must guarantee not only basic physical needs in food and housing, but also social needs, arising from the socio-cultural development of society. In the second case the minimum wage is related to the level of real wages. Thus, in Japan it is about 44% of the average wage, in the U.S. about 50%, in France about 60%, while in the Netherlands up to 75%. (Euraud & Saget, 2005)

Nowadays there are different procedures of minimum wage setting. In some countries the minimum wage is set by the legislature. For example, in the United States the national minimum wage is determined in accordance with the Law On the Fair Labor Standards (1938), which is relevant for most employees. (Waltman, 2009)

In other countries special law does not set the national minimum wage, but the minimum wages for industries or occupations (Mexico, Netherlands, etc.).

Along with the legislative method of establishing the minimum wage, in modern foreign practice is widely used conciliation, based on the principle of tripartism. For example, in Belgium and Greece the minimum wage is set by the national agreement of the Government, trade unions and employers. In Italy, the minimum uniform tariff system introduced in the main sectors of the economy at the level of industry (tariff) agreements. In some countries, minimum wages are set by the executive, often based on the recommendations of the tripartite committee representative (Canada, France, Japan, etc.).

Thus, taking into account national traditions, there are such practices of minimum wages establishing: legislative regulation, the regulation on the basis of tripartite collective agreements and regulated by the executive bodies of state power. The minimum wage may be set at the national,  regional and sectoral levels. (Euraud  & Saget, 2005)

But it is important to note that many Western experts argue that the relatively high national minimum wage prevents the creation of new jobs, especially for the young and less skilled workers. Economically unjustified increase of the minimum leads to an increase in the number of layoffs and unemployment. In this regard, in some countries the minimum wage for young people is lowered, for example in UK, France, Belgium, Norway, Netherlands, Luxembourg, Spain, Portugal, New Zealand, in certain provinces of Canada. (Euraud  & Saget, 2005)

The problem of the minimum wage is one of the most discussed in the economic policies of many countries. The dispute about what is it that affects the minimum wage, is going on for decades, sharing the economists into two camps. Proponents of the existence of minimum wages argue that government should intervene in labor relations to social protection of workers and ensure decent payment. Despite such arguments, calling for the existence of such law, there is no clear answer about the dangers or benefits of legislative regulation of wages. The opposite point of view is held by the representatives of the business. They believe that such laws only worsen the conditions for business development. The reason that proponents are against of higher minimum wage and its significant increase is the fact that in reality many jobs are destroyed. It means an artificially organized by unemployment. But people, who support increasing the minimum wage, want workers to have a decent income. However, the loss of jobs a certain amount of low-skilled workers is not the best way to achieve the goal of decent wages.

Minimum wage law establishes a level of wages. It does not establish that each citizen can actually get a job with a high rate of payment. Employees will receive very little from the theoretically higher level of minimum wages, if they can not get those jobs, where will be able to receive that salary.

In fact, labor is a valuable resource and therefore requires an appropriate payment.

From all the above we can conclude that the minimum wage is an important social norm and the criterion of social justice.

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