Minimum Wage Essay

2213 Words May 4th, 2010 9 Pages
Introduction

This critical literature review will focus on the impact of the National Minimum Wage on employment. This is an area we have had to familiarise ourselves with more and more throughout the last ten years because of the controversial effect of its instalment in April 1999 and its ever increasing minimum wage amount which causes most concern.
The application of a few statistics should help summarise the ever increasing minimum wage and the sheer scale of people affected by its introduction. The national minimum wage has increased by a staggering 59% in the last ten years; from £3.60 in April 1999 to £5.73 in October 2008. (HRM, 2008) According to George Sayers Bain (1999) as from April 1999, the year of its instalment , “some
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Research from Wilson (1989) has suggested it could lead to consequential job losses. To support Wilson’s suggestion, that a negative effects exists, is the assumption derived from the supply and demand theory. Illustrated below is a diagram similar to that of the research of Power P (2005).

When you raise the cost of something (i.e. the minimum wage), demand to employ more workers declines which therefore would imply a negative effect on employment. Cox’s (1999, cited by Pavlenkov, 1999) implementation of the supply and demand theory is more mind friendly, "Just as a worker will only offer his labor time for a wage he finds beneficial, an employer will only be willing to pay workers a wage that permits him to earn a profit. The higher the wage, the fewer workers the employer will employ. This is what economists mean when they invoke the law of supply and demand".
Inevitably many studies openly criticise this whole supply and demand theory. Card and Krueger (1995, cited in George Sayers Bain, 1998) were amongst the first economists to argue and diminish suggestions that the minimum wage would lead to job loss. They were in fact in complete contrast to this view as evidence collected, with regards to the fast food industry of various states in the USA, implied that in those states where minimum wages were enforced triggered employment growth whilst those states not enforced by the law to use the minimum wage didn’t indicate any growth.
Whereas leading

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