Advantages and Disadvantages of Minimum Wage – Case Slovenia

The minimum wage is the legally set minimum amount that an employer must pay for work within a specified period. It offers legal protection to workers against exploitation, ensures a minimum standard of living, and helps stabilise the economy to some extent by boosting purchasing power. New Zealand was the first country to introduce the minimum wage, followed by Australia, Great Britain (all before World War I), and the United States. After the Second World War, the concept of the minimum wage expanded first across Eastern Europe and later throughout the rest of the world, sometimes only in a declarative manner. While the minimum wage has certain benefits for workers and the economy, it can also have negative consequences. If it approaches or exceeds 60% of the average wage, it may decrease motivation for education, extra effort, or promotions, as job differences become less noticeable. It can also diminish demand for low-skilled workers and even restrict some groups from entering the labour market. In Slovenia, the minimum wage is legally set, but, alarmingly, it is increasing faster than the average gross wage. As a result, Slovenia is losing its economic competitiveness.