National Minimum Wage

Question 1

Positives/reasons for

Answer 1

• Reducing poverty, reduce wealth/income inequality reduces the gap rich & poor e.g. disadvantaged workers
• Increase living standards increase disposable income more money spent on g&s
• Impose minimum wage above equilibrium - wage floor
• Incentive to work boost labour market - reduces voluntary unemployment
• Fiscal benefit - more tax revenue from incomes and less spent on (unemployment) benefits - spend on other areas public services
• Boosts morale - boosts productivity, reduce staff turnover
• Incentive for firms to boost human capital - improve training, skills & productivity, replace inefficient Labour with efficient machinery boost productivity of economy

Question 2

Negatives of minimum wage

Answer 2

• Real wage (classical) Unemployment - excess supply of Labour as above equilibrium wage
• Firms may be unwilling to hire workers at this wage
• Firms cannot afford higher costs and lay off workers
• Cost to business, higher prices, inflationary, purchasing power? / shut down, bankrupt, leave country
  AO4 depends on elasticity of demand & supply of Labour, more inelastic NMW less impactful
• Depends on cost of living in the place
• government paid workers increase costs long term consequences

Question 3

Define minimum wage

Answer 3

Minimum amount per hour which most workers are legally entitled to be paid