The Argument Against the National Minimum Wage Essay

883 Words 4 Pages
The national minimum wage was introduced in the UK in April 1999 by the Labour government. Essentially it formed a major part of their manifesto as it convinced the average population that Labour were beneficial for everybody. However, they would argue against classical economics and suggest there are wide spread benefits to be gained.

The main argument is that the NMW would alleviate poverty across the country. This is an equity issue that has constantly concerned society and would go some way to redistribution of income. It is a social belief that if every one is 'well off' and lives above the poverty line, there will be positive social externalities for all. For example, those living in
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This could only be good for the economy as the supply of labour increases.

The NMW could ensure that whilst employees have increased wages and this should reduce the number of people dependant on the government via benefits. More people earning means less will need to claim job seekers allowance and acts as further saving for the government to spend elsewhere. The government's budget will further rise as increased incomes mean a greater number of people paying taxation and the level of taxation could afford to rise be small increments. The wage gap will be addressed and the effect of wage differentials will hopefully be reduced by the introduction of a national minimum wage that applies to all regions.

The benefits discussed above are for employees but business should also gain for the NMW to be considered a useful tool in the economy. The argument that people's incentive to work is increased also affects business as if people are happier in their jobs, they are less likely to consider leaving. This reduces labour turnover in markets, which is a major cost to business. Recruitment, retraining and the possible renegotiation of higher wages all raise costs for firms on a daily basis and are particularly detrimental for small firms with limited number of