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

***** purpose of this paper is an examination of the main determin*****ts of the effects of a ***** minimum wage in the UK on *****. The researcher will review the overall ***** of the minimum 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 statutory ***** wage in effect was created "when ***** economy was growing relatively strongly" (Tutor2u, 2005: p. 1). While some feared 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 the statu*****ry *****, increasing only.4 percentage points in the ***** over the two year time frame following establishment of the rate (*****, 2005).

***** *****s however would an ***** have on the economy in the UK? Those for the rate hike suggest that it will not affect employment or **********, much as creation of the in*****ial statutory minimum affected neither signific*****tly. Still others ***** that a higher ***** might help reduce the extent ***** low r*****tes of *****, and that a raise while just would do little to provide "living wages for workers in the *****" (Tu*****r2u, 2005:p. 1). The Low ***** Commission (*****; 2002; 2003) suggests that a statutory minimum wage hike may result in an *****flation increase of roughly 1.2 percentage points over the two years following its initial change and in ***** ***** following any subsequent *****, which ***** result in a total ***** 2 ½ percent inflation target according to the Bank of England (Tutor*****u 2005, p. 1).

The exact effects an increase will ***** on employment is ***** certain, though many believe ***** employment will realize ***** impacts and the rates of unemployment may rise (Figart, 2004; Low Pay Commission, 2000; Card ***** Krueger, *****995). How much employment will fall is un*****, though some believe


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