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

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***** Determinants of the Effects ***** Statutory Minimum Wage on Employment


***** have long pondered the effects of a national minimum wage on employment within ***** UK economy. Traditionally the subject ***** a statutory minimum ***** has raised great debate and conflict among employers and o*****r *****ganizational 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 *****s and has provided over 2 million workers with fair *****s (*****, 2005). The Low Pay Commission in ***** UK recently recommended the rates be ***** after meet*****g with multiple Trades Unions, confederations of employers' ***** individual ***** and business owners (Tutor2u, 2005). Proponents for an increase are arguing for a minimum rate ***** £5.00 and abolition of separate ***** ***** youths between the ages ***** 18-20, who receive less than those 21 ***** above using ***** present system (Tutor2u, 2005).

***** purpose of this paper is an examination of the main determinants of the effects of a ***** minimum wage in the UK on employment. The researcher will review the overall effects of the m*****imum wage on the ***** and labour market as well as varying theories related to the expected effects ***** introducti***** of a minimum wage incre*****e 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 ***** minimum wage might ***** a negative impact on ***** levels, little empirical evidence supports this c*****sequence. Inflation has responded relatively slowly to the statutory *****, increasing only.4 percentage points in the ***** over the two year time frame follow*****g establishment ***** ***** rate (*****, 2005).

***** effects however would an increase have on the economy in ***** UK? Those for the rate hike suggest ***** it will not affect employment or inflation, much as creation of the initial statutory minimum affected neither significantly. Still others ***** that a higher ***** might help reduce the extent of low r*****tes of *****, and that a raise while just would do little to provide "living wages ***** workers in the *****" (Tu*****r2u, 2005:p. 1). The Low ***** Commission (1999; 2002; 2003) suggests ***** a statutory minimum wage hike may result in an ***** *****crease of roughly 1.2 ***** points over the two *****s following its initial change and in ***** years follow*****g any subsequent *****, which ***** 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 employment is ***** certain, though many believe that employment ***** realize ***** impacts and the rates of unemployment may r*****e (*****, 2004; Low Pay Commissi*****, 2000; Card ***** Krueger, **********). How much employment will fall is un*****, though some believe


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