Minimum wage legislation

What is a minimum wage?

A minimum price for labour set above the free market wage to ensure fair pay.

What are the benefits of a minimum wage?

• Increases standard of living for low earners.

• Encourages work by providing financial incentives.

• No significant rise in UK unemployment despite wage increases.

• Boosts government tax revenue due to higher earnings.

What are the drawbacks of a minimum wage?

• Youth employment may fall as firms prefer experienced workers.

• Reduces international competitiveness, as higher wages raise costs.

How do skill shortages impact businesses?

• Harder for firms to expand.

• Limits innovation and raises costs.

How does human capital development improve competitiveness?

• Higher productivity enables advanced technology use.

• Lowers unit labour costs, making exports more competitive.

• Moves production up the supply chain (e.g., from primary goods to services).

How does labour market flexibility improve competitiveness?

A flexible workforce can adapt to economic shocks and demand changes.

How does migration affect labour supply?

• Increases labour supply, especially at lower wage levels.

• Greater job competition, which may lower wages.

How does migration impact productivity?

• Migrants bring high-quality skills, increasing productivity.

• If skills complement domestic workers, welfare gains occur.

Does migration significantly lower wages?

Small effect on low-income earners, but little impact on higher earners.

What is underemployment?

When workers are in part-time or temporary jobs but want full-time work.

How does education impact earnings?

• Graduates earn more over their lifetime than those with just A-Levels.

• Wage gap between skilled & unskilled workers is increasing.

What factors contribute to the gender pay gap?

Career breaks and fewer hours worked.

Women in lower-paid, part-time jobs.

Promotion discrimination.

The gap is narrowing but still exists.

Why does inequality exist in state pensions & welfare?

• Welfare payments rise slower than wages, widening inequality.

• Recent welfare cuts reduce income for those unable to work.

How do regressive taxes affect inequality?

• Lower-income earners pay a higher proportion of their income in tax.

• Increases economic inequality.