Minimum wages and Trade unions

Question 1

What is minimum wage?

Answer 1

A minimum wage sets the lowest wage which can legally be paid to a worker.

Question 2

Why are the government increasing wages?

Answer 2

-By ensuring a higher income is paid, the government is attempting to provide a better lifestyle for people who previously struggled with basic needs

-By increasing the minimum wage, the government is reducing its need to support low-paid workers and is pushing the responsibility onto employers

Question 3

What is the effect of increasing minimum wage.

Answer 3

-Incentive to invest in productivity

-Reduces inequality

-Incentive to enter labour market is higher

Question 4

What are trade unions?

Answer 4

Organisations that exist to protect the interests of their workers.

Question 5

What do trade unions do?

Answer 5

-Negotiate pay and working conditions with employers

-Provide legal protection for members, such as representation in court if an employee is fighting a case against employer

-Put pressure on government to pass legislation that improves workers rights

-Provide financial benefits, such as strike pay, whenever necessary.

Question 6

What are the effects of trade unions on wages and employment

Answer 6

Force wages up in some labour markets.

Supply perfectly elastic up until Q2, if firm wants to hire more workers beyond this wages must rise further.

Job losses might be avoided if:
-Labour productivity rises at same time
-Employers can increase prices
-Profit margins are reduced.