Lecture notes 3.5.3 Minimum Wage Legislation

3.5.3 Minimum Wage Legislation

 The minimum you can pay an employee
 Must be set above the free market price




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 Minimum wage suggests that there is a fall in employment Q --> Q1
 Inelastic labour demand will mean a small contraction in demand for labour
o Less people will lose jobs
 Elastic labour demand will mean a larger contraction in demand for labour
o More people will lose their jobs
 No evidence in UK of rise in unemployment due to a rise in National Minimum Wage
 Skill Shortage impact on international competition
o Human capital is impotent for economic development
o Developing human capital skills will improve the economy
o Improve productivity more skilled the workforce is
o More productivity a country is lower labour unit cost
o Improve international competition
 Migration
o Migration within economies
 Workforces show greater flexibility
 Inequality and Incentives
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