Requirement of Business economics for an Organization

Business Economic

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Table of Contents INTRODUCTION ..........................................................................................................................1 MAIN BODY...................................................................................................................................1 1. How change in minimum wages rate affects the employment rate of the country .................1 2) What will be the macroeconomic effects, of minimum wage change in the economy? .........................................................................................................................3 CONCLUSION ................................................................................................................................4 REFERENCES ................................................................................................................................5

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INTRODUCTION Business economics is the field of economics that deals with various factors related to the business environment, management and strategy formation taking into consideration the various economic theories and quantitative methods. The following report depict on how increase in minimum rate of wages affects the unemployment rate of the country. It also interprets how change in wages will affect the macroeconomics factors of the economy as the whole.

MAIN BODY 1. How change in minimum wages rate affects the employment rate of the country As per the above case, chancellor wants to raise minimum wages rates by ÂŁ7.20 an hour by the end of the year 2016. Chancellor also said that every year minimum wages rate should be increased by 6 percent so that by the end of the year 2020 the minimum wages rate could raise to ÂŁ9.

Increase in minimum wages rate will increases the rate of teenage and young people unemployment rate and will decrease the job growth rate. Increase in minimum wages rate will affects the working of the business organization (Carlin and Soskice, 2005). Expansion of various business organizations will be affected. Organization growth rate will decline. The reason behind this is that if a company needs to pay more wages to its employee and workers than in that case expenses of the business organization will increases. Increase in revenue will reduce the profitability margin of the company which in turn affects the company growth strategy. Due to increase in rate of expenses and decrease in profit margin company will stop recruiting new employee and workers. They will make efforts to simply train the existing employee in order to utilize the human resources to the full extent. Reduction in recruitment and selection rate will not provide the opportunities to the teenage and young people between the age group of 16-25 years of age the chance to explore their talents. They will be left to no jobs because companies are not introducing any new jobs or vacancies.

Increase in unemployment rate will also affects the overall position of the country. Increase in minimum wages rates will increase the level of standards of the people (Carroll and Shabana, 2010). But at the same time it will increase the rate of unemployment and will decrease the job growth rate. Decrease in employment and job growth rate will overall decreases the growth rate of the country.

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Increase in rate of unemployment due to increase in minimum wages rate will cause an increase in rate of poverty. Rate of poverty will increase because an individual is not able to meet its day to day requirement because of no availability of the job and money (Czinkota and et.al. 2009).

Increase rate of poverty will affects the gross domestic product (GDP) of the country. Gross domestic product indicates the level of production calculated by the country at the end of every financial year. This is used by the country to compare its overall position of the country with another country in order to calculate the rate of countries growth. Therefore, if gross domestic product of the country decrease than it will affects the growth and reputation of the country.

Increase rate of unemployment due to increase in rate of minimum wages will cause an imbalance in the market economy (Mankiw, 2014). Because decrease in employment rate will affects the purchasing power of the individual, living style of every individual will also be affected. Due to increase in rate of unemployment and decrease in job growth rate condition of deflation can arise.

For example:- if rate of minimum wages increase from ÂŁ6 an hour to ÂŁ7.20 an hour than in that case rate of unemployment will increases from 3.06 percent to 5.30 percent and at the same time job growth rate of the country will decreases from 4.21 percent to 2.96 percent by the year 2016.

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Therefore, it can be concluded that increase in minimum wages will increase the level of standards of the people but at the same time it will increase the level of unemployment (Neumark and Wascher, 2006). Increase in level of unemployment which also increases the level of poverty. Therefore, minimum rate of wages can be increased in the countries like Washington where almost 90 percent of its population of the age the group of 25 years has recently completed its higher education. Therefore, minimum rate of wages should be changed keeping in mind the actually situation of the country.

2) What will be the macroeconomic effects, of minimum wage change in the economy?

Change in minimum wages will affect the economy in many ways. Taking into consideration the given case of increase in minimum wages will affects the following factors present in the macro environment (Neumark, Schweitzer and Wascher, 2005). If minimum wages increases than in that case level of unemployment increases that proves to be one of the drawback for the economy. But at the same time it is also noticed that higher wages does not cause greater unemployment. There are more benefits of increased in wages rate as compared to its drawbacks. Therefore, some of the factors which going to be affected with change in minimum wages is as follows:Level of poverty will reduce:- Poverty is the condition where an individual is not able to meet its day to day requirement due to non availability of fund (Snowdon and Vane, 2005).

Therefore, increased wages will help the lower class people to fulfill their basic necessity which in turn assist them to increase their standards of leaving. Fulfillment of basic necessity will assist an individual to come up of the level of poverty. This is turn will aid the economy to reduce the rate of poverty and increase the growth rate of the country.

Countries growth rate will increases:- Change in minimum wages rate affects the growth rate of the country. Increase in minimum wage rate increase the growth of the country as a whole (Woodford, 2009). Because increased in minimum wages rates will assist an individual to raise his level of standards by fulfill the basic necessity of life. Higher wages will help these individuals to come up above the level of poverty this in turn increases the growth rate of the economy as a whole.

Gross domestic product (GDP) will increase:-

Gross domestic product is the

quantitative method to measure the monetary value of the goods and services produced by the country at the end of every financial year. Increased in rate of minimum wages will increases the

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gross domestic product of the company. The reason behind this is that if the company has started providing more wages to its employee and workers than he will also utilize the human resource to the full extent. This in turn will increase the level of company productivity. Increased in productivity will increase the momentary value of the goods and service supply which in turn increases the gross domestic product of the economy as a whole.

Living standards of the people will increase:- Increased in minimum wages will assist the individuals to raise their standards of living (Gitis, 2014). Standard of living will increases as a result of decrease in level of poverty. In total reduce in poverty and increase in standards of living will raise the growth rate of country as a whole.

Level of inflation will increase:- Increased in rate of minimum wages will create the condition of inflation. Inflation arises when the purchasing power of the individual increases as a result of which demand and supply of the product will also increases (Siebert, 2013). If income of the individual increases due to increases in minimum wages than in that case an individual will be able to purchase more things in order to fulfill there requirement. Arrival of condition of inflation proves to be beneficial for the country in order to increase its growth rate. Increased growth rate will assist the economy to move towards the develop nation.

Therefore, these are some of the condition which will affect the economy both in positive and negative way.

CONCLUSION From the following report it can be conclude that change in minimum wages rate will have both adverse and positive effects on the business organization, country and economy as a whole.

Higher minimum wages will definitely reduce the level of employment and job growth rate but at the same time it will increase the growth and gross domestic product of the economy as a whole. Higher minimum wages will also assist the economy to reduce the level of poverty which in turn increases the living standard of individual. Therefore, at last it can be concluded that minimum wages should be increased after analyzing the actual situation or position of the country into consideration; in order to prove the changes to be successful.

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REFERENCES Books and journals Carlin, W. and Soskice, D., 2005. Macroeconomics: imperfections, institutions, and policies.

OUP Catalogue.

Carroll, A. B. and Shabana, K. M., 2010. The business case for corporate social responsibility: a review of concepts, research and practice. International Journal of Management Reviews.

12(1). pp. 85-105 Czinkota, M. R. and et.al., 2009. International business (Vol. 4). Dryden Press.

Mankiw, N. G. R. E. G. O. R. Y., 2014. Principles of macroeconomics. Cengage Learning.

Neumark, D. and Wascher, W., 2006. Minimum wages and employment: A review of evidence from the new minimum wage research (No. w12663). National Bureau of Economic Research.

Neumark, D., Schweitzer, M. and Wascher, W., 2005. The Effects of Minimum Wages on the Distribution of Family Incomes A Nonparametric Analysis. Journal of Human Resources.

40(4). pp. 867-894.

Snowdon, B. and Vane, H. R., 2005. Modern macroeconomics: its origins, development and current state. Edward Elgar Publishing.

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