Arguments for and against the National Minimum Wage (NMW) in the UK: stop employees being taken advantage of by being paid unfair wages by their employers. set a standard of the minimum worth of a worker. This benchmark was set so that employers would be unable to hire any staff for less than the suggested hourly rate. reduce pay differentials between genders.
What is the new minimum wage?:
In October 2009, the NMW for workers increased from:
£5.73 to £5.80 per hour - aged 22 years and older
£4.77 to £4.83 per hour - aged 18 to 21 years
£3.53 to £3.57 an hour - aged 16 and 17 years
As of October 2010, the adult minimum rate will start from 21 years. Who qualifies for the Minimum Wage?
Home workers, agency workers, part-time employees, pieceworkers… most adult employees working legally in the United Kingdom with a written, verbal or implied contract, qualify for the NMW. The relationship between Demand and Supply:
Arguments in favour of the NMW:
Diagram showing potential earnings from the NMW:
Diagram showing increasing demand for Normal goods:
Reduced labour turnover, raised productivity:
Economic benefit for the country:
Monopsonistic labour markets:
A monopsony occurs when one buyer faces many sellers in a market. The buyer thus controls a large proportion of that market share. In the diagram below, a monopsonistic business maximises its profits at Q2, paying a wage at W1. (Demand = Marginal Revenue Product and supply =Average Costs). If the minimum wage increases to W2, demand for labour will increase to Q1. The level of unemployment will not increase until the minimum wage increases to an amount higher than W3. Diagram showing NMW effects on a Monopsony:
Arguments against the NMW:
Law not properly enforced:
The NMW is not a properly enforced law. The result is that is has merely become a guideline to which...
References: DEPARTMENT FOR BUSINESS INNOVATION & SKILLS., 2007. National Minimum WageGuide for Employees [online] United Kingdom. Available from:
http://www.berr.gov.uk/files/file53059.pdf [Accessed 23 November 2009]
eHOW How To Do Just About Everything. How Does The Minimum Wage Affect The Economy [online video]. Available from: http://www.ehow.co.uk/video_4974004_minimum-wage-affect-economy.html?cr=1 [Accessed 20 November 2009]
NATIONAL MINIMUM WAGE COMMISSION., 2009 National Minimum Wage. Low Pay Commission Report 2009. (Chairman George Bain). United Kingdom: The Stationery Office.
WORD PRESS., 2009. New Deal Scandal: UK Unemployment Course Scandal and Welfare Reformconcerns [online] 20 August. Available from:
http://newdealscandal.wordpress.com/2009/08/20/national-minimum-wage-nmw/ [Accessed 23 November 2009]
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