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 wage, which is just £3.60 within the UK, is much too minimal to significantly benefit employees (Tutor2u, 2005; Figart, 2004). The current pay floor, establ*****hed in April of 1999 has had many economic *****s and has provided over 2 million workers with fair *****s (Tutor2u, 2005). The Low Pay Commission in ***** UK recently recommended the rates be raised after meet*****g with multiple Trades Unions, confederations of *****' ***** individual workers and business owners (*****, 2005). Proponents for an increase are arguing for a minimum rate ***** £5.00 ********** abolition of separate rates for youths between the ages of 18-20, who receive less than those 21 and above using ***** present system (Tutor2u, 2005).

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

Expected Effects and Theory

The statu*****ry minimum wage in effect was created "when ***** economy was growing relatively strongly" (Tutor2u, 2005: p. 1). While some fe*****d creation ***** a ***** minimum wage might have a negative impact on ***** levels, little empirical evidence supports this c*****sequence. Inflation has responded ***** 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).

What *****s however would an increase have on the economy in ***** 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 signific*****tly. Still others suggest that a higher r*****te might help reduce the extent ***** low rates of pay, and that a raise while just would do little to provide "living wages for ***** in the *****" (Tutor2u, 2005:p. 1). The Low ***** Commission (1999; 2002; 2003) suggests that a statutory m*****imum wage hike may result in an ***** increase of roughly 1.2 percentage points over the two years following its initial change and in the years following any subsequent *****, which ***** result in a total of 2 ½ percent *****flation target according to the Bank of England (Tu*****r*****u 2005, p. 1).

The exact effects an increase will have on ***** is not certain, though m***** believe that e*****ployment ***** realize ***** impacts *****d the ***** of unemployment may rise (Figart, 2004; Low Pay Commissi*****, 2000; Card ***** Krueger, *****995). How much employment will fall is uncertain, though some believe


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