The starting point for understanding the minimum wage is the fact that it lies in two policy domains. In purpose it is a social welfare policy, in that its primary goal is to attack poverty. In design and operation, however, it is a labor market regulation. This fundamental fact is hugely important in the administration of the policy, of course, but it is of even more importance in its politics.
At the broadest level, those favoring minimum wage policies are the same individuals and groups who favor other measures to alleviate poverty. Opponents, again very generally, are a combination of free market ideologues and business interests. The answers to two questions will therefore determine a country’s minimum wage policy: 1) How important is the minimum wage to social welfare reformers? There are a number of available policy options for overcoming poverty, such as public services, social insurance, and public assistance, and social reformers have to decide which one or ones to emphasize. Furthermore, there are other ways to raise wages, collective bargaining, for instance, or a tax rebate for earned income. Thus, the initial questions to be asked are Where does the minimum wage rank in the minds of social welfare advocates and How much political effort are they willing to expend on its behalf? 2) How successful will the opponents be? What political resources will they bring to bear, and with what intensity will they marshal them? Will the minimum wage become a major battle ground, or will only token opposition be offered?