economics essay m.w

7/31/2019 Economics Essay M.W

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Economics Essay 23/1/12

Minimum is wage is a minimum amount per hour which most workers are entitled to be paid.

The minimum wage usually varies from country to country . A worker has to be a certain age

before he/she is entitled to a minimum wage. Minimum wages are in effect when the

government passes a legislation, which means no employer is allowed to pay workers an hourly

rate below the limit set. Minimum wages are government interference on the labour market.

In this diagram we can see that when the wage rate moves from W1(equilibrium wage rate)

to W2( Minimum wage) that the demand for labour moves from A to B .This means the

demand for labour decreases . The supply of labour moves from C to D causing an increase

in the supply of labour.

The advantages of minimum wage are:

People like Women, Ethnic minorities and low income households benefit tremendously from

the minimum wage because it is likely that their income would either be at the equilibrium wage

rate(W1) or even below that. So by automatically there wages go up allowing them to buy

products which will have a positive effect on the economy.



Minimum wage reduces poverty significantly. In the U.S.A poor families rely on the earnings of

their low income jobs, therefore with an increase of wage poverty will automatically be reduced.

The minimum wages also helps the average taxpayer, since the number of people below the

poverty line decreases there will be less tax to keep them on welfare. Therefore benefiting every

taxpayer .

Another positive effect of the minimum wage is that money related crime will decrease because

the population will be richer. In the U.K money related crime decreased by 6% ,states the British

Home office.

With all the advantages there do come a few disadvantages such as :

Unemployment- Theoretically as the wage rate moves from W1 to W2 we can see that there is

less demand for jobs but an excess of supply, this will have a negative effect on the economy

since there is more unemployment in the country. But if we take an example like U.K we can see

that there has been an increase of employment from the introduction of minimum wage ,1999.

So between 1999-2007 employment has risen to 2.4 million.

One of the main concerns with the minimum wage is that as the wage rate goes up businesses

production costs will increase therefore increasing the price of their products. So it can be

argued that the minimum wage will not have a very positive effect on the economy.

In conclusion we can see the advantages of minimum wage, such as :

Crime decrease.

Less burden on the tax payer.

Overall increase of wealth to the low income workers.

Outweigh the few disadvantages. So all in all minimum wage has a positive effect on the

economy and society proving that it is a “good thing”

By Dhruva Nair 10C

Citation:

Statistics provided by :

http://webarchive.nationalarchives.gov.uk/20110218135832/http:/rds.homeoffice.gov.uk/rds/pdfs/hosb1899.pdf

and Rob Jones edexcel IGCSE Economics Student text book.






economics essay m.w

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