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

***** purpose of this paper is an examination of the main determinants of the effects of a st*****tutory ***** wage in the UK on employment. The researcher will review the overall effects of the m*****imum wage on the economy 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 minimum wage in effect was created "when ***** ***** was growing relatively strongly" (Tutor2u, 2005: p. 1). While some feared creation ***** a ***** minimum ***** might ***** a negative impact on employment levels, little empirical evidence supports this consequence. Inflation has responded relatively slowly to the statutory wage, increasing only.4 percentage points in the ***** over the two year time frame follow*****g establishment of ***** rate (Tutor2u, 2005).

***** *****s however would an ***** have on the economy in ***** UK? Those for the rate hike suggest that it will not affect employment or *****flation, much as creation of the initial statutory minimum affected neither signific*****tly. Still others ***** that a higher r*****te might help reduce the extent ***** low rates of *****, and that a raise while just would do little to provide "living wages ***** workers in ***** UK" (Tutor2u, 2005:p. 1). The Low Pay Commission (*****; 2002; 2003) suggests that a statutory m*****imum wage hike may result in an ********** increase of roughly 1.2 ***** points over the two ***** following its initial change and in ***** *****s following any subsequent change, which may result in a total ***** 2 ½ percent inflation target according to the Bank of England (Tu*****r2u 2005, p. 1).

The exact effects an increase will have on employment is ***** certain, though m*****y believe that employment will realize negative impacts and the ***** of unemployment ***** r*****e (*****, 2004; Low Pay Commission, 2000; Card ***** Krueger, 1995). How much employment ***** fall is uncertain, though some believe


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