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 National Minimum Wages

UK Minimum Wage

• The National minimum wage rate was introduced in April 1999. It is the legal minimum that employers can pay. The main rate only applies to workers over 21.

National Minimum Wage Rates 2010 - 11

• * £5.93 - the main rate for workers aged 21 and over
  
• * £4.92 - the 18-20 rate
  
• * £3.64 - the 16-17 rate for workers above school leaving age but under 18
  
• * £2.50 - the apprentice rate, for apprentices under 19 or 19 or over and in the first year of their apprenticeship. Source: Direct Gov (1)

 

Benefits of a Minimum Wage

1. Reduce Poverty. The minimum wage Increases the wages of the lowest paid. These workers will have an increase in income and this will reduce poverty.
2. Increase productivity. The efficient wage theory states that higher wages can increase the incentive for people to work harder and thus higher wages may increase labour productivity.

3. Increase the incentivess for the unemployed to accept a job.   There will be a bigger difference between the level of benefits and the income from employment. A minimum wage could increase the participation rate as the benefits of work become greater.

4. Increased Investment. Firms will have an increase incentive to invest and increase labour productivity because labour is more costly.
5. Counterbalance the effect of Monopsony employers. If firms have Monopsony power they can drive wages down by employing less workers. However, minimum wages will make this more difficult. Therefore a minimum wage could have a positive effect on employment.

Diagram of Minimum Wage on Monopsony

A monopsony pays a wage of W2 and employs Q2.

If a minimum wage was placed equal to W1, it would increase employment to Q1.

Problems of Minimum Wage

Above the equilibrium, the national minimum wage can cause unemployment of Q3-Q2

• See more: Disadvantages of Minimum Wage

 

Essay on the Minimum Wage - Does it reduce poverty?

• Minimum wages Rates for workers 16-17 and 18-21

References

(1) National Minimum Wage Rate at Direct Gov

 

Essays and Revision Notes on Labour Markets

• Labour Markets home
• Demand for Labour
• Supply of Labour
• Wage Determination
• Labour Market Imperfections

Flexible Labour Markets

• Flexible Labour Markets
• Adv and Disadvantages of Flexible Labour Markets
• Increasing Labour Market Flexibility
• Changes UK Labour Markets
• Participation Rate
• Trades Unions
• Ageing Population

Minimum Wages

• Minimum Wages
• Disadvantages Minimum Wages
• Essay on Minimum Wage

 

 

National Minimum Wage - Low Pay commission 2006

 

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