Flashcards
Minimum wage
Cards in this deck (9)
- 1Give a brief history of minimum wages in the UKTrade boards and later wage councils set minimum wages until 1993
No minimum wage system from 1993-1999
Low pay commission established minimum wage from 1999 - 2Why is there a lower minimum wage for younger workers?Lower skills = lower productivity
Many live with parents
Makes employment more accessible which is shown to have benefits in later life - 3Who benefits most from the minimum wage?More than 60% of the following groups receive the minimum wage
- women
- part-time
- private sector
- non-union workplaces - 4What is the hypothesised effect of increasing wage on employment?Introducing a minimum wage will decrease employment as increasing the wage reduces labour demand and increases the amount of workers attracted to employment. Both of which reduce employment
- 5What does the aggregate evidence of minimum wage suggest occured?Employment rose after 1999
However there was no control group - 6Summarise a study on minimum wage What was found?Card and Kruger (1994)
In 04/92 there was a MV change in NJ but not in Pennsylvania
Looked at fast food restaurants in Mar = Dec
Increase in relative wage lead to an increase in relative employment
Concluded no evidence for hypothesised negative relationship
Repeated the study: allow for non-wage benefits, allow for restaurant closure, use high paying NJ restaurants as control
No negative relationship ever found - 7What is a main explanation for why the wage-employment hypothesis does not occur in practice?Dynamic monopsony
NMW slightly higher than monopsony wage
More workers attracted to the firm who employs them because w < VMP
Total profits decrease but firm remains as a monopsony - 8What other explanations are there for why the wage-employment hypothesis does not occur in practice?- NMW too low
- Non-compliance
- Offsetting, cutting non-wage benefits (little evidence)
- Adjusstment of hours, cutting hrs instead of wages (little evidence)
- higher productivity + make workers work harder (little evidence)
- high prices to offset higher wage bill, passes burden to consumers - 9Did the introduction of the minimum wage relieve poverty?Poverty caused by lack of work therefore NMW does not change income for this group
However amongst working HHs beneficiaries came from poorest ones
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- Year 2 ECN21005 - Labour Economics Flashcards on Minimum wage, created by Imogen Donoghue on 23/01/2023.
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- Imogen Donoghue
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