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 of 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 *****s and has provided over 2 million workers with fair wages (Tutor2u, 2005). ***** Low Pay Commission in ***** UK recently recommended the rates be raised after meet*****g with multiple Trades Unions, confederations of *****' ***** individual ***** and business owners (*****, 2005). Proponents for an increase are arguing for a minimum rate ***** £5.00 ********** 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 of this paper is an examination of the main determin*****ts of the effects ***** a st*****tutory ***** wage in the ***** on *****. The researcher will review the overall ***** of the m*****imum wage on the economy and labour market as well ***** varying theories related to the expected effects ***** introduction of a minimum wage increase in the upcoming years.

Expected ***** and Theory

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

***** *****s however would an ***** have on ***** economy in the 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 significantly. Still others suggest 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 ***** workers in the UK" (*****, 2005:p. 1). The Low Pay Commission (1999; 2002; 2003) suggests ***** a statutory ***** wage hike may result ***** an inflation incre*****e of roughly 1.2 ***** points over the two years following its initial change and in ***** years follow*****g any subsequent *****, which may result in a total ***** 2 ½ percent ***** target accord*****g to the Bank of England (Tu*****r*****u 2005, p. 1).

***** exact effects an increase will have on employment is ***** certain, though m***** believe that employment ***** realize negative impacts ********** the rates of unemployment may r*****e (Figart, 2004; Low ***** Commissi*****, 2000; Card & Krueger, **********). How much employment will fall is uncertain, though some believe


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