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Should There Be a Minimum Wage?

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Introduction

Should There Be A Minimum Wage? The wage rate in an industry is determined by the cross over point of the demand for labour for that industry and the supply of labour for that industry. The diagram below shows that with supply (S) and demand (D), the equilibrium wage rate is OW and the equilibrium number of workers supplied and demanded is ON. Now I will list a few arguments for each side of the argument. For and Against a minimum wage. For The minimum wage is there to elevate the earning of people on low incomes and help to get them out of poverty and back into emplyoment. This is the main and best reason why people support a minimum wage and is the hardest to argue against. There is very little you can do to justify paying someone such a small fee per hour, no matter how basic menial and easy the task may be. ...read more.

Middle

Basically, because people have more money, they spend more money. That in turn leads to increased revenues for small businesses, who then spend more money, which then increases the revenue for other businesses. This is what Economists call 'The Multiplier Effect'. Against Look at your a normal Supply/Demand curve which is used to determine the price for something. In the working market that price is the price of work, i.e. a wage. By increasing price you are raising the supply curve with the result that supply of labour expands, however, demand falls. In real terms this is easy to see. Increasing work costs often mean a lack in the amount of jobs available. This causes many people to believe that a minimum wage actually adds to poverty by pricing people out of jobs and increasing unemployment. The knock-on effect on the economy. ...read more.

Conclusion

Jobs are created when businesses produce goods and services that people want at prices they can afford. The more people in (reasonably payed) employment, the more good and services they can afford to buy, the more jobs created and so on. Also, the more people there are in employment, the less the government will have to pay in unemployment benefits. Another positive point about the minimum wage is that it encourages young people into the workplace. If young people can find a job paying a reasonable wage when they leave school and realise that they will be better off working than on benefits. If they start off by living on benefits they are more likely to stay on benefits and be unable to see the positive side of working. However, with a minimum wage the employers have to charge more for thier good or service to compensate for the raise in employee pay. They would then sell less of their good or service and be less competitive. ...read more.

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