Labour Market - Govt Intervention in Labour Markets

Question 1

What is a minimum wage in the labour market

Answer 1

A legally-enforced wage floor in the labour market

Question 2

Advantages of minimum wage

Answer 2

Efficiency wages:
-morale and labour productivity could improve

Encouraging workforce participation:
-incentivises more people to remain/join the workforce

Reduction in poverty

Reduced reliance on state welfare

Question 3

Disadvantages of minimum wage

Answer 3

Job Losses:
-due to an increase in production costs
-unemployment in that industry (excess supply)

Higher prices:
-to offload an increase in costs

Smaller businesses struggle to adjust to higher costs

Reduction in dynamic efficiency

Wages may not increase for those who were already on wages above the NMW

Question 4

Policies to reduce labour market discrimination

Answer 4

Anti-discrimination laws and regulations:
-Equality Act 2010

Affirmative Action/diversity initiatives:
-increase representation of under-represented groups in the workforce

Access to high quality education and training:
-investment in apprenticeship programmes
-university grants and scholarships to poorer students