Essay - Microeconomics Main Determinants of the Effects of Statutory Minimum Wage...

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Main Determinants of the Effects of Statutory Minimum Wage on Employment


***** have long pondered the effects of a national minimum wage on employment within the UK economy. Traditionally the subject ***** a statutory minimum wage has raised great debate and conflict among employers and other organizational representatives (Lipsey & Chrystal, 2004). Many have argued that the current minimum *****, which is just £3.60 within the UK, ***** much too minimal to significantly benefit employees (Tu*****r2u, 2005; Figart, 2004). The ***** pay floor, established in April of 1999 has had many economic benefits and has provided over 2 million workers with fair wages (Tutor*****u, 2005). ***** Low Pay Commission in ***** UK recently recommended the rates be ***** after meeting with multiple Trades Unions, confederations of employers' and individual ***** ***** business owners (Tutor2u, 2005). Proponents for an increase are arguing for a minimum rate of £5.00 *****d abolition ***** separate ***** ***** youths between the ages of 18-20, who receive less than those 21 and above using ***** present system (Tutor2u, 2005).

The purpose of this paper is an examination ***** the main determin*****ts of the effects of a statutory ***** wage in the ***** on employment. The researcher will review the overall ***** of the m*****imum wage on the ***** and labour market as well as varying theories related to the expected effects of introduction of a minimum wage increase in the upcoming years.

Expected ***** and Theory

The statutory ***** wage in effect was created "when ***** economy was growing relatively strongly" (Tutor2u, 2005: p. 1). While some feared creation ***** a ***** minimum ***** might ***** a negative im*****act on ***** levels, little empirical evidence supports this consequence. Inflation has responded ***** slowly to the statutory wage, increasing only.4 percentage points in the UK over the two year time frame follow*****g establishment of the rate (Tutor2u, 2005).

What *****s however would an increase have on ***** economy in the *****? Those for the rate hike suggest that it will not affect employment or inflation, much as creation of the in*****ial statutory minimum affected neither signific*****tly. Still *****s ***** that a higher r*****te might help reduce the extent of low rates ***** *****, and that a raise while just would do little to provide "living wages for workers in ***** UK" (Tutor2u, 2005:p. 1). The Low Pay Commission (1999; 2002; 2003) suggests that a statutory minimum wage hike may result in an ***** incre*****e of roughly 1.2 percentage points over the two ***** following its initial change and in ***** *****s following any subsequent *****, which may result in a total ***** 2 ½ percent *****flation target according to the Bank of England (Tutor*****u 2005, p. 1).

***** exact effects an increase will have on ***** is not certain, though many believe ***** employment will realize ***** impacts and the ***** of unemployment ***** r*****e (*****, 2004; Low Pay Commissi*****, 2000; Card ***** Krueger, 1995). How much employment will fall is uncertain, though some believe


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