Th3.5: Arguments against the National Minimum Wage

Question 1

What are the four arguments against the national minimum wage?

Answer 1

loss of jobs in the industry
raise costs for the companies
wage spiral
no consideration of regional differences

Question 2

Loss of jobs in the industry

Answer 2

the most notable negative consequence is the potential loss of jobs in the industry (or unemployment on a macro level)

Question 3

Raise costs for the companies

Answer 3

moreover the minimum wage will raise costs for the companies and so may increase their prices, which is likely to lead to a fall in profit

Question 4

Wage spiral

Answer 4

as individuals will try to protect wage differentials between them and the lowest price workers. an increase in the wage of the lowest paid will mean that others expect theirs to rise too - this will reduce profit and further reduce competitiveness

Question 5

No consideration of regional differences

Answer 5

and so this, alongside the fact many people on minimum wages are secondary earners, means the minimum wage may be ineffective at reducing poverty