16. Labour Markets - National Minimum Wage

Question 1

What are the arguments for the NMW? (1)

Answer 1

1. Poverty Alleviation2. Reduced wage differential - inequality3. Increased incentive to work - decreased Volun. UE

Question 2

What are the arguments for the NMW? (2)

Answer 2

4. Increased fiscal benefit to the government5. Increased wages - morale boost - increased produc.6. Used to counter the monopsonist employers

Question 3

What are the arguments against the NMW? (1)

Answer 3

1. Increased classical UE - demand < supplyEVAL: The extent to which C UE occurs will depends on the elasticity of D&S - more elastic = more UE 2. Youth lose out - ppl less likely to employ young ppl at higher wages bc they’re less skilled & experienced3. Ppl above the NMW may want higher wages to maintain the wage differentials

Question 4

What are the arguments against the NMW? (2)

Answer 4

4. Increased costs for businesses - go bust? - less competitive?5. Doesn’t account for regional difference - costs of living higher in South need higher NMW..6. May hurt gov. finances if the state employs the majority of low paid workers