Under a contract of employment, a person is obliged to work at the enterprise (institution) for a set time, and the entrepreneur, in exchange for his work, must pay a certain amount of money. So the labor market must be sought after. Therefore, a minimum wage is perceived externally as the price (monetary value) of labor-goods. So, there is an array of different factors that can significantly affect the minimum wages and can make a difference.
Meanwhile, how is the value of wages determined, and what factors are crucial? This issue is decided differently by participants in a market transaction. Factors that influence minimum wages might be diverse. The employer is interested in hiring a person who has a workforce of normal quality. It is, at least, about average working capacity, which ensures the proper quantity and quality of work. In turn, the owner of the labor force does not sell it to the businessman forever (otherwise he would turn into a slave), but for a certain period. He is interested in ensuring that the company provides him with normal working hours and higher wages.
Secondly, he needs a salary for which he can acquire all the benefits of life for the restoration of labor. A combination of physical and spiritual abilities to work. In other words, normal wages are equal to the cost of the living means necessary for the reproduction and development of the labor force.
However, it is important to note the factors that affect it. The labor market is volatile and, one might say, precarious product. Unlike ordinary useful things, the value of labor costs has two quantitative boundaries. The lowest physiological border is equal to the cost of vital goods and services that are sufficient to restore the working capacity of a person with the lowest level of qualification. The upper bound includes the cost of the totality of social and cultural goods and services that are required for the reproduction of highly skilled labor. Such a set historically varies depending on the degree of development of the global economy and civilization in each country.
Initial Phase of Capitalism
But the economic factors regarding the maintenance of normal wages and normal working conditions diverged very much among businessmen and wage earners, especially in the initial phase of capitalism.
For several centuries, the free enterprise system was not able to solve the problem of normalizing the conditions of wage labor and its payment. Therefore, social protests against the low wages, and arbitrariness of this system multiplied and intensified.
It has legislatively set a minimum wage level, which everyone, including private firms, must comply with. As a rule of thumb, to determine the lowest wage, government agencies calculate the so-called living wage (or poverty line). It is usually set for the family, based on standards for satisfying the minimum necessities of life for many goods and services, taking into account the level of prices. At the same time, it is supposed to provide living conditions for the employee performing the simplest work.
Of course, the minimum wage is only the starting level, from which the payment for more complex labor begins to grow. The minimum wage is periodically reviewed taking into account the rising cost of living, changes in the minimum consumer budget, and socio-economic situation. I recommend you to read more about the various factors that affect the stability of the economy. If you need essays on economic topics like minimum wage, feel free to have an eagle eye them in a snap. The formation of wages, first of all, depends on the material and socio-cultural conditions of the reproduction of labor. In this regard, the amount of remuneration for labor is determined by several specific socio-economic factors.
An important role in increasing earnings is played by the workers’ influence and skills. In other words, the size of investments in “human capital” is affected here.
Significantly affects economic growth, the level of labor productivity is quite high in recent decades due to the implementation of the achievements of the scientific and technological revolution. It is quite natural that in technologically advanced enterprises the volume of production increases, its quality improves, and wage increases.
The size of minimum wages is largely influenced by national differences in the degree of development of economic factors and social living conditions in different countries. These differences ultimately depend on the scientific and technical level of production and labor efficiency, the degree of development of the workforce, the achieved social normal quality of life, and other factors.
In addition to the economic factors considered, market factors significantly affect the number of wages.
So, the size of the minimum wages depends on several factors, which include: the cost of living resources spent on the reproduction of labor, the skill level of workers, the level of labor productivity, national differences in the degree of development of economic and social living conditions in different countries.