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

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Main 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 wage has raised great debate and conflict among employers and o*****r *****ganizational representatives (Lipsey & Chrystal, 2004). Many have argued that the current minimum *****, which is just £3.60 within the UK, is much too minimal to significantly benefit employees (Tutor2u, 2005; Figart, *****). The ***** pay floor, establ*****hed in April of 1999 has had many economic *****s and has provided over 2 million workers with fair wages (*****, *****005). ***** Low Pay Commission in ***** UK recently recommended the rates be ***** after meet*****g with multiple Trades Unions, confederations of employers' and individual ***** ***** business owners (Tutor2u, 2005). Proponents for an increase are arguing for a minimum rate ***** £5.00 and abolition of separate ***** for youths between the ages ***** 18-20, who receive less than those 21 ***** above using the present system (Tutor2u, 2005).

***** purpose of this paper is an examination ***** the main determin*****ts of the effects ***** a ***** ***** w*****ge in the ***** on *****. 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 of introduction of a minimum wage incre*****e in the upcoming years.

Expected ***** and Theory

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

What effects however would an increase have on the economy in the *****? Those for the rate hike suggest that it will not affect employment or *****flation, much as creation of the in*****ial statutory minimum affected neither signific*****tly. Still others ***** 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 for workers in the UK" (Tutor2u, 2005:p. 1). The Low Pay Commission (1999; 2002; 2003) suggests that a statutory minimum wage hike may result in an *****flation increase 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 of 2 ½ percent inflation target according to the Bank of England (Tutor2u 2005, p. 1).

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


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