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What is minimum wage in uk?

What is minimum wage in UK?

In UK, a minimum wage is least hourly, weekly or monthly wage which pay by employers to employees or workers.

The Main Aim of the Minimum Wage:

  1. Labour market Bias: The Minimum wage is a tool intended to offset some of the effect of determined bias of many low -paid females employees and younger employees.
  2. Labour market incentives: The minimum wage is intended to improve the incentives for people to start looking for work- so boosting the economy's available Labour Supply.
  3. The Equity Justification: Different jobs should offer a fair rate of pay commensurate with the experience and the ability of a worker or an employee.

How does minimum wage work?

The minimum wage is a price floor. Employers cannot officially cut down the current minimum wage rate per hour. That are applies for both fulltime and part time employees.

Labour Supply and Demand Curve analysis can be used to show the effects.

We can see from the diagram the possible effects of a minimum wage. Where demand equal to supply, Minimum wage behaves as a price floor on labour, this equilibrium wage for this particular labour market is at W1.the minimum wage is set at Wmin, there will be an excess supply of labour equal to E3-E2 because the supply of labour will expand for which employees will be willing and capable to offer themselves for work at the higher wage than before, but there is a risk that the demand for employees from employers will contract if the minimum wage is introduced.

Argument in favour of Minimum Wage in UK:

Answer is depends on the situation in the labour market when a pay floor is introduced. There are two main explanations for the possibility of higher employment.

The importance of Elasticity of Demand and Supply of Labour:

The impact of minimum wage on employment levels depends in part on the elasticity of demand and elasticity of supply of labour in different industries. If labour demand is relatively inelastic then the in reduction in employment is likely to be less severe than if employers' demand for labour is elastic with respect to changes in the wage level. Elasticity refers to how supply and demand respond to various factors, including price as well as other stochastic principles.

Below Diagram we can see the possible effects of a minimum wage when both labour demand and labour supply are elastics in response to a change in the market wage rate. The excess supply created is much higher than in the previous diagram.

Argument against the minimum wage in UK:

The Rev. D. James A. Forbes Jr.: A Just Minimum Wage, “Poverty is one of silent killers in the life of our nation. Its cumulative effect is as devastating as earth quakes, floods, fires and hurricanes. More people die each year from poverty-related causes than the combined casualties from war, natural disasters and homicide… The impact of poverty is a weapon of mass destruction in our midst.(1)”

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