Please note! This essay has been submitted by a student.
Economy is one of the most complex systems of interaction in society spurred by production, distribution and trade of goods such as natural resources, labor and capital. A country’s economy may vary depending on various factors such as their culture, history, laws, geography, among others and evolves due to necessity. It is a “large set if inter-related production and consumption activities that aid in determining how scarce resources are allocated” (Investopedia. com, 2018).
These goods flow through the market depending on supply and demand, which tends to balance itself naturally; as prices rise due to demand, money and labor needed to balance the supply filter wherever it is needed. But, in some cases, when a Central Political Agent intervenes and decides the price and controls the distribution of these goods, then some imbalances are more likely to occur, resulting in uncontrollable inflation (prices spike due to high demand and low supply) or deflation (prices drop due to poor demand). The most controversial scenario in which a Central Political Agent is involved is when the government decides on the minimal wage a company is required to pay by law to its employees for the most basic of labors it requires (commonly not many skills are needed in this type of job).
The minimal wage was first set in 1938 to balance the power that employers had when taking advantage of the unemployed (which was at 25% at the time) desperate for a job and avoid their exploitation. It is such a delicate topic because of the amount of consequences the wage set has in the economy and the living conditions of society in general, too high a minimum wage and inflation quickly and overwhelmingly raises because of the immense spending power and shortage of supplies, and unemployment also increases because companies cannot afford to pay for a large workforce. While if its too low poverty increases, living conditions worsen and even unemployment also happens because people seek other ways to get money easier and faster (like crime). An example of how devastating these effects can be is Colombia where the minimum wage is just $781,242. 00 (pesos) a month, which is approximately $259 dollars.
Currently, living conditions in Bogota, Colombia for the average person are poor; basic needs are not met and compensation for labor is extremely low, these are all factors that contribute to unemployment, insecurity, bad economy and consequently a halt in progression. A careful and well-grounded determination of wage considering skills and availability among other criteria is a viable solution because it will improve living conditions of local workers and thus improving productivity and employee-employer relationship, competitivity in hiring will increase as well as cultural values (like work ethic) and overall a more competitive workforce, and finally there will be a sustainable boost in local economy.