Evaluating Minimum Wage

• What are the pros of higher minimum wage?

  • Equity justification
  • Poverty education
  • Training
  • Incentives
  • Anti-discrimination
• Why is equity justification a pro of higher minimum wage?

  Reduces inequality
• How is poverty education a pro of higher minimum wage?

  Boosts the take-home pay of thousands of lower paid workers.
• How is training a pro of higher minimum wage?

  Workers are incentivised to stay due to higher wages so firm can retain more employees which means they don’t have to spend as much on training of new workers.

  Encourages firms to up-skill their workers and can lead to higher labour productivity.
• How are incentives a pro of higher minimum wage?

  • More motivation to work —> more employees
  • More motivation to increase productivity
• How is anti-discrimination a pro of higher minimum wage?

  A way of tackling discrimination of low-paid female/younger workers.
• What are the cons of higher minimum wage?

  • Jobs
  • Small businesses
  • Training
  • Competitiveness
  • Inflation
• How are jobs a con of higher minimum wage?

  Higher minimum wage adds to the costs of employing workers and might cause higher unemployment.
• How are small businesses a con of higher minimum wage?

  Small businesses may not be able to afford higher wages due to increased costs of production.
• how is training a con of higher minimum wage?

  Better incentives for training than a minimum wage e.g. tax relief on apprenticeships.
• How is competitiveness a con of higher minimum wage?

  Competitiveness decreases as businesses may pass increased costs onto the consumers in the form of higher prices.
• How is inflation a con of higher minimum wage?

  Increased wages means more disposable income which causes increased consumption, increased AD so demand-pull inflation.