Minimum wage and Brain Drain || Theory of distribution || Bcis notes

Minimum wage and Brain Drain || Theory of distribution || Bcis notes

Minimum wage and Brain Drain

Minimum wage is the level of wage that employers are required to pay at least at their employees and Brain drain is also known as human capital flight, which can occur on several levels. Brain drain is a slang term indicating substantial emigration or migration of individuals with technical skills or knowledge from organization, industry or geographical regions.

In addition to occurring geographically, brain drain may occur at the organizational or industry levels when worker perceives better pay, benefits, or upward mobility within another company or industry.

Brain drain may be of three types:

  •  Organizational brain drain
  •  Geographical brain drain
  •   Industrial brain drain

i) Organizational brain drain:

  • Organizational brain involves the mass exodus of talented workers from a company, often because they sense instability, a lack of opportunity within the company, or they may feel that they can realize their career goals more easily at another company.

ii) Geographical brain drain:

  • Geographical brain drain happens when talented professionals flee one country in favor of another.

iii) Industrial brain drain:

  • Industrial brain drain happens when skilled workers exit not only a company but an entire industry.

Besides these, it may be caused by the social environment,  lack of opportunities, political instability or oppression, economic recession health risk, lower level of minimum wages, etc. It is also observed that if workers are getting minimum wages at a reasonable level and better opportunities to the skilled workers, brain drain will be discouraged and if workers are not getting minimum wage at a reasonable level not only that if the government has strongly enacted minimum wage law, business firms tend to reduce the value of production.

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