Minimum wage and discrimination in the labour market

Question 1

Minimum wage

Answer 1

A legally enforced pay floor in the labour market. Employers cannot pay below the hourly minimum wage rate for employees of a certain age. Their are fines for non compliance.

Question 2

Advantages for minimum wages

Answer 2

-Poverty reduction-Less relative poverty and equitable distribution of income
-Boosting consumer spending-More disposable income to spend on goods or services
-Reducing reliance on state welfare
-Incentivises workforce participation
-Efficiency wages-Higher labour productivity

Question 3

Disadvantages of minimum wage

Answer 3

-Job losses-Firms may respond to higher wage rates by reducing workforce or automating tasks
-Higher prices-Cost push inflation and fall in real incomes
-Small business struggles-may find it difficult to absorb higher labour costs
-Fall in investment-Higher costs and lower profits with a negative effect on planned business investment

Question 4

Discrimination in the labour market

Answer 4

This occurs when employees make decisions on wages and employment based on prejudices

Question 5

Types of discrimination in the labour market

Answer 5

-Gender
-Race
-Religion
-Age
-Sexual orientation

Question 6

Discrimination and labour market failure

Answer 6

It is often the result of deep rooted information failures and causes resource misallocation as well as increased inequality. Lack of diversity can hamper innovation and productivity.

Question 7

Policies to tackle labour market discrimination

Answer 7

-Anti discrimination laws and regulations e.g. UK equal impact
-Affirmative action / diversity Initiatives
-Access to quality education and training-addresses skill gaps and provides opportunities for marginalised groups to acquire skills for higher paying jobs.