FDN0009: Minimum Wage Abolition Essay

This essay examines the arguments for and against abolishing the National Minimum Wage (NMW). It defines minimum wage, its historical context in the UK, and its aims (equity, labor market incentives, combating discrimination). The essay details the different NMW rates based on age in the UK. It then explores the economic arguments surrounding the NMW, including criticisms that it creates deadweight loss and unemployment, and counterarguments that it improves living standards, reduces poverty, and increases worker morale. The author concludes that the NMW should not be abolished due to its positive impacts on low-income families and its role in reducing poverty and inequality. The essay supports its arguments with references to various academic journals and government websites.

Research for Practice (FDN0009)
Essay
Should the National Minimum Wage be abolished?
Student Name: Romina Ionescu
Student Id:LON160114008
Date:27th June 2016
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ESSAY
Should the national minimum wage be abolished?
The concept of minimum wage has emerged under the policy that is regarded as
National Minimum Wage. Under the payment is made on pay per hours. Nearly all the
personnel are part of this. The National Living Wage is greater than National Minimum
Wage. The workers get this in case they are over 25. It does not matter how smaller an
employer is but they are required to offered with correct as well as least amount in form
of wages (Stewart, 2004). In the present essay the discussion is being made on
whether national minimum wage rate needs to be abolished. The present essay would
include arguments in both favor and against of the subject matter under investigation.
Wage is considered as the factor of production which is being determined by the
means of interaction among the market force of demand as well as supply. The term
Minimum wage can be defined as the minimum compensation amount that is required
to be attained by an personnel in order to perform labor. Minimum wages is being
established through contract or legislation by the regulatory authority (Metcalf, 2008).
This is because it is not legal to make payment to an employee lesser than the minimal
wage. The aim of the nominal wage rate attempts at offering protection of the personnel
from exploitation. In addition to this it allows them in affording basic necessities
associated with life. The rate of minimum fluctuates among the countries and this is
sometimes among the states or provinces. Minimum wage to a greater extent has
drawn stronger criticism from the several economist which presents that as it has lead
price floor on the wages (Falk, Fehr and Zehnder, 2006). Thus this price floors has
resulted in dead weight loss within the economy. This implies that there is presence of
inefficiency. In this situation the minimum wage can force the organizations to hire fewer
workforce which can further lead to causing an increase in the rate of unemployment to
a greater extent. In this situation the minimum wage can force the organizations to hire
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fewer workforce which can further result in causing an enhancement within
unemployment rate to a significant level.
The emergence of minimal wage was considered as the major programme that
was carried out by labor party in the year 1991. Under this the government has decided
to set up a low pay commission for the purpose of recommending as well deciding the
National Minimum Wage. The national minimum wage is regarded as one of the most
important involvement of the labour market which is being made by the regulatory
authority of the labor. The major feature of the law was to offer appropriate wage to the
employees who are less paid without making limitation in their opportunities regarding
employment (Dolton, Bondibene and Wadsworth, 2012). Further it also includes
provision relating with no harm to the efficiency of the organization. The minimal wage
was being initiated in the year 1999 that is being encountering a tremendous amount of
growth. The aim beside which the national minimum wage came into existence is equity
justification. Along with this it has objective to gain labor market incentives. Moreover it
has aim to fight against the labor market discrimination. In addition to this it possess the
objective that relates with setting up the price floor where personnel can attain minimum
wage per hour.
The National Nominal Wage can be regarded as the minimal amount that can be
paid on per hour basis, which several number of the employees within UK are entitled to
gain. There is presence of varied levels of Normal Minimum Wage which depends on
the age (Kaufman, 2010). The current rate includes the following. The rate for the
workers that are aging from 21 and over are entitled to get a minimum wage rate of
£6.70. In addition to this for 18- 20 years the minimum wage rate is £5.30. Along with
this £3.87 is the minimum wage rate for the workers from 16-17 that are higher than
school leaving age but are under 18. £3.30 is the apprentice rate, for the apprentices
under 19 or 19 or over that. This would be attained within the starting years of their
apprenticeship.
The National Minimum Wage legislation is regarded as the law that demonstrates
the minimum amount which the employer would pay to its employees for carrying out
the job in a particular kind of work. The concept relating within the minimum wage
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legislation came into emergence during the first two decades of the 20th century. This is
often regarded as the progressive era. In the general the individual who consider
themselves as the progressives advocated through governmental authority for limiting
some of the negative impact of rapid industrialization as well as urbanization bought
about by the means of growth of large scale corporate capitalism (Coats, 2007). During
the progressive era the minimum wage legislation did not offer protection to the men in
the ordinary occupation. But it only offers opportunity relating with the prevention to
women and children. The National minimum wage is considered as the lowest amount
that can be paid by the employer in an legal manner to its employees in a particular
country. The new national minimum wage aims towards lifting up 300000 workers as
well as their children from poverty.
The National minimum wage is considered as the price floor below which the
workers would not make sales of their labor. The law of minimum wage are in effect with
many jurisdictions, but there is greater difference in the opinions regarding the
advantages as well as disadvantage of the minimum wage (Lee and Saez, 2012). It has
been critically assessed that minimum wage increases the standard of living of the
employees. With the assistance of Minimum wage the employees are getting benefit of
gaining fix amount of the job that is being performed by them. Thus this has significant
role in increasing the living standard of the personnel to a greater extent as they are
able to afford the expenses that are basic necessities of the human beings. Along with
this it acts as an aid in reducing the poverty (Aghion, Algan and Cahuc, 2011). It has
been gained that by means of application of law relating to Minimum Wage the
employees are able to attain fix return which can assist in reducing the poverty. Along
with this none of the employees would remain unemployed. This results in bringing the
effectiveness within the economy. Along with this it minimizes inequality and boost
morale of the employees. As every personnel is provided with minimum wage without
any biasness as well as discrimination on the basis of race, religion and background.
Thus thus would result in minimizing the inequality. Along with this it has greater
advantage towards offering greater motivation to the personnel (Schulten and Watt,
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2007). This is because as the employees are able to gain minimum wage on the work
performed by them. Further such leads to enhancement of their ability to work with
greater potential. Thus this they leads to increasing the morale of the employees to a
greater extent. Further it brings improvement in the quality of the work that is being
performed by them. Moreover it has significance in forcing the organization to become
highly efficient. This is because as the employees are motivated thus they carry out
performance with greater effectiveness and such would lead to enhancement in the
growth of the entire business to a significant level.
On the other hand there are several disadvantages associated with the minimum
wage. This includes that it increases the poverty as well as unemployment specifically
among the unskilled or inexperienced workers. Moreover it is damaging the business as
excessive higher wages needs to the organization to increase the prices of the products
and services. Thus they need to accommodate extra expenses towards payment of
higher wages to the personnel (Hussein, 2011). It has been stated by several economist
that there needs to be abolishment of the minimum wage concept. Several arguments
have been presented within the essay which reflects that pros and cons of the minimum
wage. But in accordance with my point of view I believe that national minimum wage
should not be abolished. There is due to presence of various benefits that are being
offered by this facility. The Minimum wage law is effective in preventing the lower as
well as middle class people from poverty. The minimum wage law is being developed
for the purpose of keeping middle class stronger. Along within this minimum wages are
dependent upon the cost of living so effective laws makes sure that people are able to
afford the basic necessities. The law relating with the minimum wage increases the
amount of money that is possessed by low income workers (Croucher and White,
2007). Further it is comprised of the amount that employees tends to spend their
disposable income. With the increase in standard of living of the people their would be
greater flow of money within the economy. This this thereby results in bringing growth
and development in the economy to a greater extent.
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There is presence of greater advantages that are associated with Minimum
wage. This demonstrates that it has effectiveness in helping the families. This implies
that with the increase in earning the family of worker can be offered with basic
necessities which can assist them to grow and develop. However it has been critically
assessed that with the absence of minimum wage the employees will be forced to work
on lesser money. Such to a greater extent would decrease the exploitation of the
employees and would allow them in attaining better amount for the job that is being
performed by them in an effective manner (Basu, Chau and Kanbur, 2010). Another
major benefit associated with the minimum wage relates with reduction in tax burden.
An individual who is taking minimum wage is not making use of several public services
as many on unemployment. As per the experts it has been gained that an unemployed
employee is offered welfare, rent assistance as well as food stamps in several states.
With the presence of minimum wage there requirement towards public assistance gets
lowered. Thus this acts as an aid in making reduction in the tax burden on the society
as well as the state. The role minimum wage is greater towards reducing the poverty
(Portugal and Cardoso, 2006). The wages of the lowly paid employee get increased by
the imposition of the concept that relates with minimum wages. The increased income
of the labor demonstrates that there is reduction in the poverty level. Thus this thereby
would result in leading a better life than ever before. The minimum wages legislation is
the major concept that has assisted in increasing the productivity of the national
industries.
The individuals have the tendency to favor the job that is providing sufficient
wages. In 2008 there was greater fall within the economy that is the biggest economic
crisis. The major influence of this crisis was the termination of the employees by greater
number of organizations in varied parts across the globe. With this situation the number
of unemployed has increased to a greater extent. In situation if the minimum wage is
increased the there would be enhancement in the incentives for the individuals who are
unemployed and are in search of jobs. However there is presence of such case
wherein the difference among the income as well as benefits from the employment is
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bigger (Meer and West, 2015). Therefore it has been gained that which the existence of
legislation there would be increase in the participation rate as the benefits from the
working has enhanced to a greater extent. The employment market possess
Monopsony employers. The role of minimum wage is significant within the market on
the employee's perspective as they counterbalance the impact which is brought through
monopsony employers. In situation when the given forms possess monopsony powers
there is major disadvantage of driving the wages down by the means of employment of
less workers (The National Minimum Wage and Living Wage, 2016). But where there is
existence of minimum wages such situation become difficult. This has positive impact
on the employment which has emerged as result of emergence in the concept of
minimum wages.
It can be concluded from the essay that National Minimum Wage must not be
abolished as it possess greater number of benefits that can assist the people of lower
class in making enhancement in their standard of living. Further implementation of
National Minimum Wage leads to reducing the discrimination on the basis of age,
gender, race, religion, disability as well as sexuality.
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REFERENCES
Journals and Books
Aghion, P., Algan, Y. and Cahuc, P., 2011. Civil society and the state: The interplay
between cooperation and minimum wage regulation. Journal of the European
Economic Association, 9(1), pp.3-42.
Basu, A.K., Chau, N.H. and Kanbur, R., 2010. Turning a blind eye: Costly enforcement,
credible commitment and minimum wage laws. The Economic Journal, 120(543),
pp.244-269.
Coats, D., 2007. The national minimum wage: retrospect and prospect. Work
Foundation.
Croucher, R. and White, G., 2007. Enforcing a national minimum wage: the British case.
Policy studies, 28(2), pp.145-161.
Dolton, P., Bondibene, C.R. and Wadsworth, J., 2012. Employment, Inequality and the
UK National Minimum Wage over the Medium‐Term. Oxford Bulletin of Economics
and Statistics. 74(1). pp.78-106.
Falk, A., Fehr, E. and Zehnder, C., 2006. Fairness perceptions and reservation wages:
The behavioral effects of minimum wage laws. The Quarterly Journal of Economics,
pp.1347-1381.
Hussein, S., 2011. Estimating probabilities and numbers of direct care workers paid
under the National Minimum Wage in the UK: a Bayesian approach. Social Care
Workforce Periodical, 16, pp.1-33.
Kaufman, B.E., 2010. Institutional economics and the minimum wage: broadening the
theoretical and policy debate. Industrial & Labor Relations Review, 63(3), pp.427-
453.
Lee, D. and Saez, E., 2012. Optimal minimum wage policy in competitive labor markets.
Journal of Public Economics, 96(9), pp.739-749.
Meer, J. and West, J., 2015. Effects of the minimum wage on employment dynamics.
Journal of Human Resources.
Metcalf, D., 2008. Why has the British national minimum wage had little or no impact on
employment?. Journal of Industrial Relations. 50(3). pp.489-512.
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Portugal, P. and Cardoso, A.R., 2006. Disentangling the minimum wage puzzle: an
analysis of worker accessions and separations. Journal of the European Economic
Association, 4(5), pp.988-1013.
Schulten, T. and Watt, A., 2007. European Minimum Wage Policy: A Concrete Project
for a Social Europe. ETUI-REHS.
Stewart, M.B., 2004. The employment effects of the national minimum wage. The
Economic Journal. 114(494). pp.C110-C116.
The National Minimum Wage and Living Wage. 2016. [Online].Available from:
https://www.gov.uk/national-minimum-wage/what-is-the-minimum-wage. [Accessed
on 20th June 2016].
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