NMW Flashcards
Reasons for why the NMW doesn’t always cause unemployment
Other factors e.g recession or inflation
April 1999 NMW was introduced at 3.60 unemployment still went up
Cafe Nero removed free lunch in response to the NLW opting to cut out non pecuniary benefits without reducing unemployment
In 1992 card and Kruger found increasing NMW for fast food workers in New Jersey while pensylvania kept the same in reducing unemployment had no impact on it
Recent studies have suggested there is some evidence of a link but could be difficult to prove in a dynamic labour market
Arguments in favour of NMW
Increases hourly pay for lowest paid workers thus potentially reducing poverty and inequality
Higher proportion of women in low paid occupations an increase in min wage will reduce gender pay diffrentiatials
NMW increases incentive to work reduces likelihood of benefit trap increasing government tax revenue and reduces govement expenditure
Low paid workers have higher MPC increase in there earning may lead to an increase in consumption with attendant multiplier effect
Increasing earnings more motivation productivity may rise as a result increasing MPP and MRP
Arguments in favour of NMW
Reduces pay diffrentiatials between companies lower labour turnover resulting in firms having more incentive to invest in human capital
Counteract effects of dominant employer (monopsonist)
Efficiency wage theory based on idea paying higher wages leads to more than proportionate increase in productivity workers know if the lose there job they will not get the same somewhere else so would work harder to keep the job (ford dolllar per day in 1914)
Arguments against NMW
Will do little to alleviate poverty among those who are unable to work or those whose hours are restricted by necessity
May cause unemployment among the young who lack skills makes them less productive
Poorly targeted as not everyone earning NMW lives in a household of poverty
May act as a pay norm in some industries and hold wages down in others , workers may bid up wages to maintain pay differentials
Industrial action
Strik action - workers withdraw from labour for given period until demands are met
Work to rule- workers refuse to do anything beyond there contracts including overtime
Go slow (decreases productivity)
Lock out ((strike by employers)
Nmw for 21 +
£12.21
6.7% increase
NMW for 18-21
£10
1.4% increase
Nmw Under 18
7.55
18% increase
Nmw apprentice
7.55
18% increase
