The original intent of minimum wage laws was to
ensure that all workers earned enough to survive.
However, some economists maintain that these laws
may have reduced the chances for unskilled workers to
get jobs. They argue that the minimum wage raises the
unemployment ratebecause it increases labor costs
for business.MONOPOLY
A situation in which only one seller controls the
production, supply, or pricing of a product for which
there are no close substitutes.
In the United States, basic public services such as elec-
trical power distributors and cable television suppliers
operate as local monopolies. This way of providing utili-
ties is economically more efficient than having several
competing companies running electricity or cable lines
in the same area.
Monopolies, however, can be harmful to the econo-
my. Since it has no competition, a monopoly does not
need to respond to the wants of consumers by improvingproduct quality or by charging fair prices. The govern-
ment counters the threat of monopoly either by breaking
up or regulating the monopoly.MULTINATIONAL CORPORATION
A corporationthat operates in more than one country.
ExxonMobil (United States), DaimlerChrysler
(Germany), Royal Dutch/Shell (Netherlands), BP
(Great Britain), and Toyota (Japan) are examples of
multinational corporations. A multinational corpora-
tion’s foreign operations, including factories, offices,
and stores, are usually wholly owned subsidiaries run
by managers from the home country. Some multina-
tionals, however, enter foreign markets by establishing
joint ventures with foreign businesses. Others gain
access to foreign markets by buying large amounts
of stock in foreign companies.
Such tactics have allowed some multinationals to
grow into economic giants with a truly global reach.
For more information on the size of some top multina-
tionals, see the graph on page 1076.NATIONAL DEBT
The money owed by a national government.
During wartime, economic recession, or at other times,
the government may employ deficit spending.However,
the government may not pay back all the money it has
borrowed to fund this policy. Each year’s government
budget deficit adds to the country’s national debt. By
August 2005, the national debt of the United States
stood at $7.93 trillion, or about $26,900 for each citizen.
The rapid growth of the U.S. national debt since
1980 has prompted many Americans to call for
changes in government economic policies. Some sug-
gest that the government raise taxes and cut spending
to reduce the debt. Others recommend the passage of
a constitutional amendment that would require the
government to have a balanced budget, spending
only as much as it takes in.POVERTY
The lack of adequate income to maintain a minimum
standard of living.
In the United States, this adequate income is referred
to as the poverty threshold. The poverty threshold for a
family of four in 2004 was $19,307. That year, the
poverty rate stood at 12.7 percent. Americans living in
poverty numbered 37 million, an increase of 1.1 million
from 2003. The graph on the next page shows the
changes in the poverty rate in the United States
between 1981 and 2001.Monthly Minimum Wages in Selected
Countries, February 2002 (Estimates)Source: Eurostat0
Euro
(approx. $1.15)300 600 900 1200 1500United StatesUnited KingdomSpainPortugalNetherlandsLuxembourgIrelandGreeceFranceBelgiumR70 ECONOMICSHANDBOOK