I think a blog is only as good as the reader that it attracts.  So I think I need to write more about topics that interest more people, especially about managing finances, and a broader picture about economics.

Much has been said about the recent petrol price hike, and certain Trade Unions demanding a minimum wage (see link).  I'm just going to very simply describe the effects of minimum wage from a supply/demand chart.

Let's assume that this is the demand chart for labor in this country for a certain sector, say IC Designers.

Let me explain this chart further.  This chart simply means if the price per IC Designer (let's abbreviate it to ICD from now on) is less, the company is willing to hire more ICDs.  And likewise if they demand a obnoxiously high salary, companies might be less willing to hire them (less demand).

And then there is this supply chart.

Also let me explain this chart, in case none of you took macroeconomics in college.  This chart means if the salary for ICD is high, more people are willing to go through college and toil their behinds off just so that they can come out of college doing nothing but pushing polygons and digging damascene drains (higher supply).  Likewise, if the pay is lower, more people would consider other jobs (lower supply)....... so you get the point.

When markets are free to move and decide (but not subject to too much speculation), a general consensus is reached, and this point is known as the equilibrium.

This equilibrium point is decided by supply and demand, and it is free to move.  When there are less ICDs in the market, industries will offer better compensation packages to lure them, thus pushing the equilibrium price point higher.  When there is too many ICDs in the market, some are willing to take paycuts or lower increment percentages just to join the industry and feed their children (thus pushing the equilibrium price lower).

So.... back to the main point of the story.  What happens when you implement a minimum wage?

When you implement minimum wage this is what will happen.  When demand is low, and the actual equlibrium is low, but since government implement minimum wage, so the company has no choice but to reject applications although people are willing to work for a lower salary (equilibrium).  So as a result, there are more jobseekers than there are jobs available, and the deficit is unemployment !

So, I don't want to unnecessarily scare you, but if government were to implement minimum wage, then we might see and even larger pool of unemployed in this country.  And worse, jobs may move to other countries where minimum wage is not a government policy.

So... be careful what you wish !!