National Minimum Wage

• The NMW is the minimum amount an employer can pay their workers per hour.
• There are different rates depending on age, whether apprentice or not, and industry sector.
• National minimum wage


  A major government intervention in labor markets to redistribute income and make labor market outcomes more equitable and fair
• Positive points of national minimum wage

  • Reducing poverty
  • Helping to reduce the gap between the rich and the poor or the high paid and the low paid
• How a minimum wage works

  1. Government imposes minimum wage above the equilibrium wage level

  2. Increases wages for those paid minimum wage

  3. Reduces gap between high and low paid
• Minimum wage


  Creates an incentive to work, especially for the voluntarily unemployed
• Minimum wage


  Provides fiscal benefits to government through increased tax revenue and reduced benefit payments
• Minimum wage


  Incentivises firms to boost human capital of workers through training and skills development
• Minimum wage


  Can counter negative outcomes of monopsony employers offering very low wages
• Minimum wage above equilibrium

  Causes classical/real wage unemployment as labour supply exceeds demand
• Classical/real wage unemployment


  Unemployment caused by minimum wage being set above the equilibrium wage rate
• Youth are more likely to struggle to justify employment at minimum wage due to lack of experience and skills
• Elasticity of labour demand and supply

  The more inelastic, the less the impact of unemployment from minimum wage
• Minimum wage


  Reduces pay differential between high and low paid workers, leading to demands for higher wages from high paid workers
• Minimum wage


  Increases costs for businesses, risking business closures, relocation, and reduced competitiveness
• Minimum wage may not account for regional differences in cost of living
• Government employing low-paid workers

  Minimum wage increases government costs and hurts government finances