NMW Full Essay Plan Flashcards
(13 cards)
When may a government impose a minimum wage?
A minimum wage can be imposed when governments feel that competitive market wages are insufficient for workers to sustain a satisfactory standard of living.
What are the Pros for a national minimum wage?
A national minimum wage can boost the wages of the lowest paid, reduce poverty, lower income inequality, reduce voluntary unemployment, increase fiscal intake for the government, boost productivity, encourage human capital investment, and combat monopsonist employers.
How can the imposition of a national minimum wage reduce voluntary unemployment?
It provides an incentive for those living on welfare or savings to find work, improving their standard of living and promoting a work-not-welfare attitude.
How can the imposition of a national minimum wage increase the fiscal intake for the government?
Incomes rise for a large proportion of the population, leading to increased revenue from income tax and VAT, reducing strain on government finances.
How can the imposition of a national minimum wage boost productivity?
Receiving a substantial pay increase can boost worker morale, translating into higher productivity, benefiting both employers and the economy.
How can the imposition of a national minimum wage encourage employers to boost human capital?
Firms will likely provide more training to ensure workers’ marginal revenue product meets or exceeds the minimum wage, improving skills and profitability.
How can the imposition of a national minimum wage be a powerful weapon against a monopsonist employer?
It can counter monopsony power by increasing wages and employment to competitive levels, improving labor market efficiency.
What are the cons/evaluation points for the national minimum wage?
Potential unemployment due to increased costs, dependency on labor demand elasticity, youth and low-skilled workers may struggle, unintended business consequences, regional pay differences, and potential deterioration of government finances.
How can a minimum wage lead to unintended consequences due to its negative impact on businesses?
It can increase costs for businesses, leading to shutdowns, relocation, or reduced worker perks, and may cause inflation and competitiveness issues.
What may be the consequence of deteriorated government finances due to a national minimum wage?
Borrowing and/or taxation may have to rise, burdening current and future generations.
Explain how a national wage may not fully take into account regional differences in pay.
A national minimum wage may not address wage disparities, particularly in regions where costs of living differ significantly.
Assess the argument that both the short and long-term performance of the UK economy will be helped by a significant increase in the minimum wage (Arguments For).
Short-term: Stimulates consumer spending and AD, lifting earnings for low-paid jobs. Long-term: Improves productivity and labor supply, leading to stronger growth and higher living standards.
Assess the argument that both the short and long-term performance of the UK economy will be helped by a significant increase in the minimum wage (Argument Against).
Short-term: May not significantly lift AD due to reduced hours and claw-back in welfare payments. Long-term: Higher operation costs could reduce profits, investment, and productivity growth.
