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

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***** Determinants of the Effects of 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 o*****r *****ganizational representatives (Lipsey & Chrystal, 2004). Many have argued that the current minimum *****, which is just £3.60 within the UK, ***** 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 (*****, *****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 of £5.00 *****d abolition of separate ***** ***** youths between the ages ***** 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 ***** minimum w*****ge in the UK on employment. The researcher will review the overall ***** of the minimum wage on the economy ***** labour market as well ***** varying theories related to the expected effects of introduction of a ***** wage increase in the upcoming years.

Expected Effects and Theory

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

***** effects however would an ***** ***** on ***** economy in the *****? Those for the rate hike suggest ***** it will not affect employment or inflation, much as creation of the initial ***** minimum affected neither signific*****tly. Still others suggest 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 Pay Commission (1999; 2002; 2003) *****s that a statutory minimum wage hike may result in an inflation increase of roughly 1.2 percentage points over the two ***** following its ***** change and in ***** years follow*****g any subsequent change, which ***** result in a total ***** 2 ½ percent ***** target accord*****g to the Bank of England (Tutor*****u 2005, p. 1).

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



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