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

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Main Determinants of the Effects of Statutory Minimum Wage on Employment


Economists have long pondered the effects of a national minimum wage on employment within the UK economy. Traditionally ***** subject ***** 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, *****). The ***** pay floor, established 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 ***** after meeting with multiple Trades Unions, confederations of employers' and individual workers ***** business owners (Tutor2u, 2005). Proponents for an increase are arguing for a minimum rate ***** £5.00 *****d abolition of separate rates ***** youths between the ages of 18-20, who receive less than those 21 and above using ***** present system (*****, 2005).

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

Expected Effects and Theory

The statu*****ry ***** wage in effect was created "when the economy was growing relatively strongly" (Tutor2u, 2005: p. 1). While some fe*****d creation of a national minimum ***** might have a negative im*****act on ***** levels, little empirical evidence supports this consequence. Inflation has responded ***** slowly to ***** statutory wage, 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 increase have on ***** economy in the UK? Those for the rate hike suggest that it will not affect employment or **********, much as creation of the initial ***** minimum affected neither signific*****tly. Still *****s suggest that a higher ***** might help reduce the extent of low ***** of pay, and that a raise while just would do little to provide "living wages ***** workers in the UK" (Tutor2u, 2005:p. 1). The Low Pay Commission (*****; 2002; 2003) suggests that a statutory ***** wage hike may result in an inflation increase of roughly 1.2 ***** points over the two ********** following its ***** change and in ***** years following any subsequent change, which may result in a total ***** 2 ½ percent ***** target according to the Bank of England (Tu*****r2u 2005, p. 1).

***** exact effects an increase will ***** on employment is not certain, though many believe that employment ***** realize negative impacts and the rates of unemployment ***** r*****e (*****, 2004; Low ***** Commission, 2000; Card ***** Krueger, 1995). How much employment will fall is un*****, though some believe


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