Minimum wage

• What is the definition of minimum wage?


  Minimum wage is a legal minimum amount that employers must pay workers for their labour.
• What is the purpose of setting a minimum wage?


  To ensure workers receive a basic standard of living.
• What are the two types of minimum wage in the UK?

  The National Minimum Wage (NMW) for workers under 23 and the National Living Wage (NLW) for those 23 and over.
• How does a minimum wage function in the labour market?


  It acts as a price floor, preventing wages from falling below a certain level.
• What are the primary rationales for implementing a minimum wage policy?


  To reduce poverty, address income inequality, increase worker productivity, reduce exploitation, and stimulate economic growth.
• What was the aim of introducing the National Living Wage in the UK in 2016?


  To ensure that workers aged 25 and over could earn a wage that better reflected living costs.
• What happens to labour supply and demand when a minimum wage is set above the equilibrium wage?


  Labour supply increases while labour demand may decrease.
• What type of unemployment can result from setting a minimum wage above the equilibrium wage?


  Structural unemployment.
• What is wage compression in the context of minimum wage?


  It narrows wage differentials between low-skilled workers.
• How might minimum wage policies affect employment structure?


  They may encourage part-time or temporary contracts to reduce costs.
• How can minimum wage policies incentivize productivity?


  Higher wages may motivate employers to invest in training and technology.
• What are some potential advantages of minimum wage policies?


  They can reduce poverty, increase motivation, reduce income inequality, increase consumer spending, and reduce government welfare spending.
• What is a potential disadvantage of minimum wage policies?


  They may lead to job losses, especially for low-skilled workers.
• How might businesses respond to higher minimum wage costs?


  They may invest in automation, reduce working hours, or raise prices of goods or services.
• Which group of workers is most likely to be negatively affected by a significant increase in the minimum wage?


  Low-skilled workers.
• What factors should be considered when evaluating the effectiveness of minimum wage policies?


  Employment effects, poverty reduction, economic growth, income distribution, and long-term impacts.
• What does a balanced evaluation of minimum wage policies acknowledge?


  It recognizes both potential benefits and drawbacks, varying by specific circumstances.