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

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


Economists have long pondered the effects of a national minimum wage on employment within ***** UK economy. Traditionally the subject of a statutory minimum ***** 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, ***** much too minimal to significantly benefit employees (Tu*****r2u, 2005; Figart, 2004). The ***** pay floor, established in April of 1999 has had many economic benefits and has provided over 2 million workers with fair wages (Tutor2u, 2005). ***** Low Pay Commission in the UK recently recommended the rates be raised after meeting with multiple Trades Unions, confederations of employers' and individual ***** ***** business owners (*****, 2005). Proponents for an increase are arguing for a minimum rate of £5.00 *****d abolition ***** separate ***** ***** youths between the ages of 18-20, who receive less than those 21 and above using the present system (Tutor2u, 2005).

The purpose of this paper is an examination of the main determin*****ts ***** the effects of a st*****tutory ***** wage in the ***** on employment. The researcher will review the overall ***** of the minimum wage on the ***** and labour market as well as varying theories related to the expected effects of introducti***** of a ***** wage incre*****e in the upcoming years.

Expected ***** and Theory

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

What effects however would an increase ***** on the economy in ***** *****? Those for the rate hike suggest ***** it will not affect employment or inflation, much as creation of the initial statutory minimum affected neither signific*****tly. Still *****s ***** 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 ***** UK" (Tutor2u, 2005:p. 1). The Low ***** Commission (*****; 2002; 2003) suggests ***** a statutory m*****imum wage hike may result in an inflation incre*****e of roughly 1.2 ***** points over the two ***** following its ***** change and in the *****s follow*****g any subsequent *****, which may result in a total ***** 2 ½ percent ***** target according to the Bank of England (Tutor*****u 2005, p. 1).

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


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