3.5.3 Minimum Wage Legislation
The minimum you can pay an employee
Must be set above the free market price
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
The minimum you can pay an employee
Must be set above the free market price
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
