The National Minimum Wage - Chapter 9

  • Created by: sammilaw
  • Created on: 29-03-16 10:39
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  • The National Minimum Wage
    • Chapter 9
    • Strengths:
      • Entry point for students to find a job - may go on to find higher paid work
        • Teaches responsibility, discipline etc
        • Benefits economy in the LR
      • Firms cannot exploit their workers
        • Especially monopsonists
      • Distributes some of a firm's wealth to the people that produce it - inequalities reduced
      • May lift people out of poverty
      • Firms more careful in who they hire = higher productivity
      • Employees may work harder with increase pay
    • Weaknesses:
      • Increase in the firm's total costs
        • Less workers hired
        • Increased prices for goods
      • Does not help those who do not have a job or are illegally employed
      • Those with higher wages than the NMW will want pay increases to maintain differentials
        • NMW = inflationary
      • Those that get tips i.e. waiting staff may receive less = income not increased
      • Ineffective if set below market wage rates
      • Abolishing the NMW allows the firm to structure their company in a way that suits theirneeds
      • Risk of firm's outsourcing labour to foreign countries
        • Or workers substituted for machinery
      • Some firms may struggle to cover NMW costs i.e. non profitable charities


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