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


***** 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 o*****r *****ganizational 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, established in April ***** 1999 has had many economic benefits and has provided over 2 million workers with fair wages (Tutor2u, 2005). The Low Pay Commission in the UK recently recommended the rates be raised after meet*****g with multiple Trades Unions, confederations of *****' and individual ***** and business owners (Tutor2u, 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 ***** present system (Tutor2u, 2005).

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

Expected ***** and Theory

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

What effects however would an ***** ***** on the economy in the *****? Those for the rate hike suggest that it will not affect employment or **********, much as creation of the initial statutory minimum affected neither signific*****tly. Still others ***** that a higher ***** might help reduce the extent of low rates of *****, and that a raise while just would do little to provide "living wages for workers in ***** UK" (*****, 2005:p. 1). The Low Pay Commission (********** 2002; 2003) suggests that a statutory ***** wage hike may result ***** an inflation increase of roughly 1.2 ***** points over the two ***** following its ***** change and in ***** ********** following any subsequent change, which ***** result in a total ***** 2 ½ percent ***** target accord*****g to the Bank of England (Tu*****r2u 2005, p. 1).

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


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