The minimum wage is the lowest amount an employee can be paid by law or by contract.It's meant to be a safety net for employees to make sure businesses don't unfairly take advantage of them. Before the minimum wage law was enacted in the U.S., and in countries that don't have minimum wage laws, desperate workers were employed in sweatshops, making only dollars a day, with 14-hour work days. Many of these workers were women and children.

The minimum wage laws in many countries also limit the number of hours, and prohibit child labor.

Pros and Cons of the Minimum Wage:

Arguments rage back and forth over whether the minimum wage is healthy for an economy or not. For the most part, those in favor of the minimum wage are affiliated with labor, while those opposed are with business. However, a minimum wage offers both pros and cons for business, labor and the economy as a whole. Like so many policy decisions that affect the economy, some will suffer while others will benefit. Furthermore, it is difficult to measure the effects of any economic policy in isolation.

Pros:

First and foremost, minimum wage laws intend to provide enough income to afford a living wage. That is the amount needed to provide enough food, clothing and shelter. This improves worker morale by allowing the most vulnerable, such as women and children, to pay for the cost of living. It also increases productivity by making sure workers have enough to eat and aren't over-worked.

A minimum wage spurs economic growth by giving workers more money to spend. This increases demand, further boosting business growth.

Workers who have more time and money can then invest in their own education, further increasing their productivity over time, and improving the attractiveness of the country's labor pool. A more highly-educated workforce can increase innovation and create their own businesses. Another benefit to businesses with a minimum wage is that workers would be less likely to leave to find a higher-paying job. This reduces turnover and expensive retraining costs.

Cons:

Businesses point out that the minimum wage raises their labor costs, which are already the single largest budget item for most of them. By being forced to pay more per worker, they must hire fewer workers if they want to keep the total labor costs the same. This increases unemployment for the economy overall. It especially hits low-wage workers the hardest, since they must now compete for fewer jobs.

Second, some smaller companies may not have ability to hire fewer workers. They may be forced to declare bankruptcy instead. A minimum wage penalizes companies that are labor-intensive. By default, this rewards those that are in capital-intensive industries. Over time, this can shift the very fabric of the country's economic base.

Third, minimum wage laws may increase job outsourcing. Companies may move their facilities to countries where labor costs are lower.

Fourth, minimum wage laws may not even address their primary goal, which is to reduce poverty. By increasing unemployment, these laws increase the average poverty level. (Source: Minimum Wages, David Newmark and William Wascher, MIT Press)

The Pros Outweigh the Cons...Up to a Point:

Research shows that a minimum wage can actually increase the number of jobs in an economy. Businesses find other ways to offset higher labor costs, by increasing prices or reducing the number of hours worked. Workers' morale, productivity and consumer spending all increase.

However, the pros only outweigh the cons if the minimum wage at low levels. Wages cannot be so high that they reduce business flexibility to keep labor costs low during an economic downturn. In setting a minimum wage, the government has to find the sweet spot between protecting workers and giving businesses the flexibility they need to remain competitive. (Source: The Economist, Sense and Nonsense About Minimum Wages, November 10, 2012)

Compare the National Minimum Wage 

Every country sets its own minimum wage. Most of them review and adjust it annually, depending on the cost of living. The U.S. minimum wage is lower than most other countries around the world, even though its cost of living is higher. It hasn't been changed since 2009.

• U.S. minimum wage -- $7.25 per hour. The wage can vary by state or by status of employees, such as age.
• UK minimum wage -- £6.31/hour (US$10.78). Varies by age.
• Ireland minimum wage --- €8.65/hour (US$11.66). Varies by age.
• European Union countries -- 21 of the EU's 28 members have national minimum wages. The laws usually apply to all employees. The wages ranged from a low of €174/month in Bulgaria to a high of €1,921/month in Luxembourg (roughly US$235 to US$2,597). Six EU countries have a minimum wage higher than the U.S. They are Netherlands, Ireland, UK, France, Belgium and Luxembourg.
• Thailand -- 300 baht/day (US$9.88). Enacted January 1, 2013. Doubles the pay for some rural workers.
• Australian minimum wage -- AU$16.87/hour (US$15.84). Varies by age and job status.

Countries With No National Minimum Wage:

Canada has no national minimum wage. Instead, each province and territory sets its own level. The national government is trying to get all of them to set a minimum of $12/hour (US$11.95). For details, see Canada Minimum Wage.

Mexico also has no national minimum wage. A commission sets the minimum wage for the highest paid zone. That wage is 65 pesos a day, or $5.10. However, this minimum is far below what any worker receives. It's used primarily as a base for negotiations. (Source: CBS MarketWatch, Mexico Raises Minimum Wage, December 18, 2012)

China also has no national minimum wage. That's because the cost of living is so varied across the country. Instead, each province sets its own level, with general guidance given by the national government. As a result, the minimum wage is at least 1,000 RMB/month (US$160). For details by province, see China Minimum Wage Update, May 25, 2012)

India also has no national minimum wage, although the Minimum Wage Act of 1948 said that states must negotiate with businesses to set a standard that afforded a living wage. In 2012, the national government suggested that states adopt a minimum wage of 115 rupees/hour (US$2.13). Article updated January 31, 2013