Should Government Raise the wages of the Low Paid?

Readers Question: Assess the case for and against the government intervening to raise the disposable income of workers on low pay.

Government could raise disposable income by:

1. Increasing minimum wages
2. Reducing taxes on poor
3. Increasing benefits

Government intervention to increase low paid workers has various benefits.

1. Reduces inequality within society
2. Higher wages may encourage greater productivity as people are more motivated.
3. Increase incentive for unemployed to get a job.
4. Reduce dependence on benefits.
5. Government can counter Monopsony power amongst employers

However, there are various problems of government intervention

1. Higher wages may cause unemployment in competitive markets
2. Higher wages may discourage firms from investing in the UK.
3. Cost of government regulation.
4. Higher taxes and benefits may reduce incentives to work and create a poverty trap

How does a government increase wages?

The main tool would be the minimum wage policy. For more detail see essays on the minimum wage

Does a minimum wage reduce poverty?

Policies to reduce poverty