SPECIAL ISSUE OF INDIAN DOMINION MARCH, 2014

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Economics of Minimum Wage

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Economists are split over the merits of the minimum wage. There are some of the most convincing arguments for and against the minimum wage. This issue has become more relevant in the wake of on going debate over the wage system under MNREGA in India. Most economists believe that minimum wage laws cause unnecessary hardship for the very people they are supposed to help. The reason is simple: although minimum wage laws can set wages, it cannot guarantee jobs. In practice it often pushes price low-skilled workers out of the labor market. Employers typically are not willing to pay a worker more than the value of the additional product that he/she produces. This means that an unskilled youth who produces Rs.250/- w orth of goods in an hour will have a very difficult time finding a job if he must, by law, be paid Rs.300/- an hour. As Princeton economist David F. Bradford wrote, “The minimum wage law can be described as saying to the potential worker: ‘Unless you can find a job paying at le...
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Taxing the Super Rich

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Amidst wide anticipations of taxing the ‘super-rich’ of the country, Finance Minister P. Chidambaram said in his budget speech 2013-14 that an additional 10% surcharge would be levied on those whose taxable income is above Rs 1 crore per annum. While maintaining a status quo on the Income Tax slabs, Chidambaram announced his intention to widen the tax base. Chidambaram said, “India’s Tax GDP ratio is one of the lowest in the world.” “We should reclaim 11.9% Tax to GDP ratio in the short term,” he said.  There has been a raging debate in the country in the run-up to the budget on the desirability of a higher tax rate on the rich. While a number of economists and Wipro chairman Azim Premji have supported taxing the rich at a higher rate, there are some who have termed the move as counterproductive. The Government should a ddress the lack of progressive structure in the country’s tax system and raise the much needed additional resources for financing education, health care, an...
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