The role of the minimum wage in the economy

The paper starts with a short history of the minimum wage (from 1894 in New Zealand till 2014 in Germany). Then the reasons for the introduction of the statutory minimum wage are presented. It was introduced in order to reduce the exploitation of workers, ensure an adequate standard of living of people performing the simplest works and eliminate certain forms of unfair competition in the labour market.

The next part of the paper presents the results of empirical research on the social and economic effects of the minimum wage. The reasons why the minimum wage should be raised and why it should not be raised are discussed. I also try to show some conclusions regarding the pro and cons of raising the minimum wage.

The last part of the paper is concentrated on the Polish economy. The liberal model of economic policy implemented in Poland clearly favours business. This is reflected in: the reduction of taxes, more and more elastic labour market, low unemployment benefits which are paid over shorter timeperiods , reduced range of social benefits, tolerance for the large informal sector which makes it possible for employers to evade taxes and employ workers under unfavourable conditions.

The government, employers and liberal oriented economists point out that increasing minimum wage leads to an increase in labour costs. The most important negative consequences of the increase of the minimum wage include, among others, unemployment growth, increase in labour cost and weakening of competitiveness of the economy, a threat to business, especially to small firms, which operate on the brink of insolvency and may face bankruptcy, extending the shadow economy. These allegations have not been confirmed by statistical data on the Polish economy or the results of empirical research presented in the paper.

It seems that the proponents of inhibiting the increase in the minimum wage are at the same time the supporters of a competitive strategy based on low labour costs and low taxes, which would make it possible to achieve a price advantage. It is a strategy typical of countries with a relatively low level of economic development. With a strategy based on knowledge and innovation, it is the opposite. It requires efficient business management, sacrifice, and effort. In the long term, however, such a strategy can ensure the success of the economy and society.