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

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

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

Expected Effects and Theory

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

What effects however would an increase have on the economy in the UK? 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 significantly. Still others suggest that a higher rate might help reduce the extent of low rates of pay, and that a raise while just would do little to provide "living wages for workers in the *****" (Tutor2u, 2005:p. 1). The Low Pay Commission (********** 2002; 2003) *****s ***** 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 ***** years follow*****g any subsequent change, which may result in a total of 2 ½ percent *****flation target according to the Bank of England (Tutor2u 2005, p. 1).

***** exact effects an increase will have on employment is ***** certain, though m***** believe that employment ***** realize negative impacts *****d the ***** of unemployment may rise (*****, 2004; Low Pay Commission, 2000; Card & Krueger, *****995). How much employment will fall is un*****, though some believe


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