Based on the diagram above, the measure supply of local labour before puting minimal pay ( P1 ) is at Q1. After puting minimal pay ( P2 ) , the measure supply of local labour additions to Q2. The measure supply of entire labour before puting minimal pay ( P1 ) is at Q4. After puting minimal pay ( P2 ) , the measure demand decreases to Q3. Owing to the ground that puting minimal pay, deficits of local labour at JKL arises at the minimal pay of P2 and excess of foreign labour at EKM arises at the minimal pay of P2.
The scene of minimal rewards will increase the unemployment rate because employers will look to engage more specialised employees or fewer employees to keep healthy borders ( Chotin, Finch, Eaton, Engham, Goldblatt, 2009 ) . An illustration of unemployment from indexing would be Washington. Washington ‘s adolescent unemployment in 1999 was 19.7 % and as indexing was applied its adolescent unemployment increased to 29.7 % in twelvemonth 2008 ( Chotin, Finch, Eaton, Engham, Goldblatt, 2009 ) . The undermentioned graph illustrates the growing in adolescent unemployment rates in Washington ( Chotin, Finch, Eaton, Engham, Goldblatt, 2009 ) . It used to compare with the unemployment rates of the remainder of United States.
This graph shows that when minimal pay rises companies engage fewer employees to work. For retail merchants, this means fewer employees on the floor merchandising, keeping stock list and assisting clients to happen merchandises. For illustration, shops which focus on client service will non be able to do such sweeping employee cutbacks ( Chotin, Finch, Eaton, Engham, Goldblatt, 2009 ) . Market Basket, a food market shop nutrient concatenation based out of Massachussetts is an illustration of a shop focussing on client satisfaction, which faces issue on raising minimal rewards. Market Basket hires many immature teens to maintain the floor full of employees to assist the clients every bit much as possible. They besides try to do certain the shop clean, presentable and reply clients ‘ inquiries. Therefore, when puting lower limit pay, it will coerce Market Basket and other services focuses retail merchants cut dorsums in other countries ( Chotin, Finch, Eaton, Engham, Goldblatt, 2009 ) .
Besides that, if the authorities puting minimal rewards policy, it will impact the productiveness and efficiency of employers or manufacturers ( Chua, 2008 ) . When there is minimal pay policy, the manufacturers will seek alternate manner to cut down the figure of employees such as trade in new machine and new technological in order to salvage the cost of production in long-run footing. For illustration, there are two every bit productive workers assigned to unclutter a wooded batch. The first worker is given a shovel and an axe, the 2nd, bulldozer. Therefore, the 2nd worker is more productive comparison with first worker because difficult work can non vie with better engineering ( Matthew B. Kibbe, 1998 ) .
In add-on, minimal rewards policy causes rising prices in the state. When the authorities set higher minimal rewards policy, the manufacturers are unable to get by with costs of production. It will do the monetary values of all merchandises to increase enormously. Therefore, the population, particularly the low income category, would happen it more hard to remain in the high life outgo society. Based on the economic expert, this known as cost-push rising prices ( Michael Pollick, 2010 ) . An addition in the federal lower limit pay will increase the costs of production, which later consequences in an hyperbolic monetary value for consumers.
Employers prefer to engage aliens because they are bear downing lower rewards and are more willing to work excess hours ( Loh, 2009 ) . In twelvemonth 2008, foreign non-residents persons account for 1.2 million people of the full population and with the premise that foreign labour from Singapore is non foreign endowment. Therefore, if the state sets the minimal rewards policy, it will cut down dependence on foreign labour because Malaysians will be granted precedence in occupation arrangement compared to foreign workers ( Chua, 2008 ) .
As a consequence, the minimal pay policy would convey advantages and disadvantages to Malaysia and her population. To cut down the consequence of the disadvantages of lower limit pay, the Malayan authorities demands to work out the most effectual manner on cut downing the disadvantages of minimal pay policy so that authorities and population can derive every bit much as benefits as hoped. The authorities would hold to look into the inside informations refering to the defects of the minimal pay policy such as the possibility of addition in foreign labour alternatively of local labors and see other possible jobs that could originate.
Gross Domestic Product ( GDP ) is defined as the entire market value of a state ‘s end product. It is the market value of all concluding goods and services produced within a given period of clip by factors of production located within a state ( Case & A ; Fair, 2002 ) . The production of a given value of goods and services would bring forth an equal value of income. Therefore, the necessary equality between the GDP and gross domestic income indicates that the GDP can be measured both as the entire value of end product produced and as the income generated in bring forthing that end product ( Tregarthen, 1996 ) . Therefore, in the undermentioned essay, GDP per capita is used as a step of economic growing and life criterions of a state over a period of clip.
2.2 Measuring Economic Output Performance
A state ‘s economic end product public presentation is presently measured utilizing the GDP of the state. A method practiced by about all states soon. The GDP is a widely used and recognized method of economic measuring in many states. It is updated often and monitored by specific national statistical organic structures to guarantee the best truth of the economic measuring ( Madsen, 2006 ) . GDP enables the state contrivers and economic contrivers to supervise the economic tendency of the state in a regular, periodic footing.
Despite the standardised GDP, there are many restrictions to this construct. One of these restrictions is GDP per capita fails to include non-marketed end product and family production. GDP per capita does non include the value of the attempt and clip put into supplying household goods and services ( Tregarthen, 1996 ) . For illustration, a household repainted their house by themselves without utilizing the services of a skilled painter. Their clip and attempt was non included in the computation of the GDP. However, if the household uses the service of a skilled painter to repaint their house, the value would be added into the GDP. These would demo in the GDP. However, it does non reflect the existent addition in production. It may reflect a displacement in production from a class that is non included in the GDP ( eg. family production ) to another class that is included.
GDP besides fails to include environmental debasement ( Waterson, 2010 ) . An increasing income and growing of a state could be happening at the disbursal of the environment. Fast developing states run a hazard of doing negative outwardnesss to the environment. The fabrication sector could be lending a batch to the state ‘s GDP, nevertheless, the sector could besides be the major subscriber to the air pollution in the country due to the fume released. The contaminated air can do take a breathing jobs and diseases among the neighbouring societies.
Furthermore, income derived from the black market and voluntary work is non accounted for in the GDP ( Madsen, Dec 2006 ) . In the instance of the black market, there are no studies of production to the authorities to hedge revenue enhancement and the jurisprudence. For illustration, the belowground activities, like harlotry, human trafficking, and drug trafficking, are really moneymaking. However, they are non reported because of the jurisprudence. In the instance of voluntary work and charitable organisations, they do non gain income in the first topographic point. Therefore, it is non reported in the GDP despite the end product generated.
2.3 Measuring Rising Standard of Living
The most common step of criterion of life is the usage of existent GDP per capita ( Federal Reserve Bank of Boston, 2003 ) . Real GDP per capita is the inflation-adjusted GDP per capita. Assuming other facets remain equal, a sustained addition in existent GDP would increase the state ‘s criterion of life provided the end product additions at a faster rate compared to the entire population ( Riley, 2006 ) .
The advantage of utilizing existent GDP per capita is that the state contrivers and economic system contrivers are able to develop economic policies and development programs since the tendency in the GDP per capita at a specific period would reflect the life criterions of the population ( Madsen, 2006 ) . Therefore, associating to the newspaper article in the inquiry, the Prime Minister of Malaysia, Datuk Seri Najib Tun Razak, had revealed the New Economic Model 2010 because the authorities believes that the life criterions of Malaysians can be farther improved.
However, there are restrictions to the use of existent GDP per capita as a step of life criterions. The failure to see the distribution of income is one of its defects. Because existent GDP per capita ( per capita income ) is an index of the mean living criterion of single members of the population, it can non project the existent life criterions of the population ( Madsen, 2006 ) . Income of the population varies harmonizing to the geographical part ( Hillstrom, n.d. ) . Part of the population may be acquiring their income from the fabrication industry whereas another portion could be gaining their income from the touristry sector.
Per capita income besides varies greatly through out the universe. Harmonizing to Susan Dentzer in U.S. News and World Report, in 1988 the top 20 per centum of states worldwide ( based on one-year national income ) reported per capita income figures an norm of 65 times greater than the bottom 20 per centum of states. As of the last one-fourth of 2009, Malaysia ‘s per capita income ( Gross National Income per capita ) figure stands at RM25,201 ( Department of Statistics Malaysia, 2010 ) .
The existent GDP besides does non take into history the leisure clip. All other variables equal, more leisure clip is better than less leisure clip ( Tregarthen, 1996 ) . Consuming leisure would intend that less work attempt would be supplied which means bring forthing less GDP. For illustration, if the authorities imposes a maximal 5 office and working hours per twenty-four hours, the labour attempt in the state would cut down significantly doing the GDP to fall. However, this does non intend that the population is worse away compared to the old period. Harmonizing to Tregarthen, the population would stop up devouring more goods and services because of the excess leisure clip. This state of affairs implies that the autumn in GDP would be accompanied by the addition in public-service corporation.
As a decision, our squad agrees that economic end product public presentation and lifting criterions of life can be step utilizing per capita income. In our sentiment, it is a safer and more prudent step to minimize a state ‘s economic system growing than exaggerate it. Despite all the defects of the GDP, GDP does mensurate the production of goods and services which are chief focal points of economic end product public presentation ( Tregarthen, 1996 ) . Until a more comprehensive and better theoretical account is introduced, the GDP construct still holds. In the instance of life criterions, on the other manus, existent GDP per capita can be supported by other alternate indexs which are the Genuine Progress Indicator ( GPI ) , the Human Development Index ( HDI ) and the Index of Social Health.