FINAL Coursework

February 13, 2019 Economics

FINAL Coursework: argument essay
Academic Research and Writing
MOD003311
The Minimum Wage should be increased

The minimum wage, often referred to as the National Minimum Wage (NMW) is the lowest pay per hour that a worker is paid in the United Kingdom. It depends on the age of the worker and whether the employee is an apprentice. The National Minimum Wage rates are revised every year by the government through the advice of Low Pay Commission (LPC) which is an independent body. The current National Minimum Wage rates are £7.83 for individuals above 25 years, £7.38 for workers aged 21 to 24 years, £5.90 for 18 to 20 years, £4.20 for those aged below 18 years, and £3.78 for apprentice (Davis, Hirsch, and Padley 2014, p. 236). It is important that the minimum wage rates should be increased in order to encourage customer spending, grow the economy, enhance employee productivity, and minimise absenteeism and worker turnover
Increase in minimum wage helps in reducing relative poverty, a situation which occurs when part of the society’s income is below the average salary. The current minimum wage of £7.83 is not enough especially for adults with children to live on, and it is not in order that individuals who work hard get paid very low for their efforts (Manning 2013, p. 58). Therefore, the minimum wage should be increased to enable such workers to live better. Increasing the minimum wage will help to reduce the inequality in wage between the middle-and low-income employees; one of the greatest causes of the wage disparity is the value of minimum wage (Manning 2013, p. 63). Since NMW was introduced, a number of low paid workers have had an increase in their hourly wage and this has significantly reduced relative poverty.
Increasing the minimum wage also helps in growing the economy by reducing the wage disparity between the workers in low and middle-income level and also raising general household spending which in turn increases the GDP (Linde Leonard, Stanley, and Doucouliagos 2014, p. 507). Increasing workers’ pay raises their ability to spend and propensity to consume. Additionally, increase minimum wage increases investment as businesses will have an improved incentive to invest in order to raise labour productivity so as to meet the growing labour cost. Moreover, a rise in minimum wage increases workers’ participation rate because it makes the benefits of employment better and more meaningful (Blundell, Crawford, and Jin 2014, p. 377). According to Unite, Britain’s biggest trade union, an increase in minimum wage by £1.50 can generate about £2.1 billion, and this can significantly help in growing the economy.
Increasing minimum wage helps to reduce worker turnover and increase employee productivity by making work more attractive. Efficiency wage theory explains that rise in wages can raise the incentive for employees to work harder thus increasing labour productivity (Linde Leonard, Stanley, and Doucouliagos 2014, p. 517). Moreover, if companies have to pay more, they will have to enhance focus on improving labour productivity which in turn enhances economic efficiency. In a study that was conducted by London School of Economics in 2014, it was found that turnover rate for restaurant employees and teenagers reduce significantly as a result of a minimum wage increase. The decline in worker turnover rate is beneficial to businesses including the small establishments as it raises their productivity and consumer satisfaction.

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Opponents of minimum wage rise have argued that it will affect small businesses by making them unable to pay their workers hence may be forced to close either down or reduce hiring. Moreover, they also claim that increasing the minimum wage will make it difficult for low skilled workers to acquire jobs and be upwardly mobile (Khamis 2013, p. 494). These arguments are not valid because one, increasing minimum wage will not affect small businesses because the wage council has differentiated the level of the minimum wage by occupation, region, and age. Moreover, in a study conducted by economists T.D. Stanley and Hristos Doucouliagos who reviewed 64 minimum wage studies found that there was very little or no evidence of an undesirable relationship between employment and minimum wage (Hirsch, Kaufman, and Zelenska 2015, p. 231). Additionally, a report written by the UK Low Pay Commission which includes the results of a meta-analysis of the literature of UK national minimum wage found no statistically substantial effects of an increase in minimum wage on employment.
It is my recommendation that the minimum wage should be increased, however, in revising the minimum wage, the views of all stakeholders should be considered through consultation. The impacts the rise will have on economy and competitiveness should also be taken into account. Collecting stakeholder opinion will help to determine how they feel about the intended change and carry out awareness campaigns were necessary to ensure that all understand the benefits of increasing the minimum wage.

In conclusion, the minimum wage should be increased. The rise will help in growing the economy by reducing the wage disparity between the workers in low and middle-income level and also raising general household spending which will, in turn, increase the GDP. Moreover, it will decrease worker turnover and increase employee productivity, and also reduce poverty. It is essential to understand that everybody deserves to live a better life, and this cannot be achieved with the current federal minimum wage. Therefore, the minimum wage should be increased to enable those who work hard get a fair reward for their efforts and improve their living standards.

Bibliography
Blundell, R., Crawford, C. and Jin, W., 2014. What can wage, and employment tell us about the UK’s productivity puzzle? The Economic Journal, 124(576), pp.377-407.

Davis, A., Hirsch, D. and Padley, M., 2014. A Minimum Income Standard for the UK in 2014. Joseph Rowntree Foundation© Loughborough University.

Hirsch, B.T., Kaufman, B.E. and Zelenska, T., 2015. Minimum wage channels of adjustment. Industrial Relations: A Journal of Economy and Society, 54(2), pp.199-239.
Khamis, M., 2013. Does the minimum wage have a higher impact on the informal than on the formal labour market? Evidence from quasi-experiments. Applied Economics, 45(4), pp.477-495.

Linde Leonard, M., Stanley, T.D. and Doucouliagos, H., 2014. Does the UK minimum wage reduce employment? A meta?regression analysis. British Journal of Industrial Relations, 52(3), pp.499-520.

Manning, A., 2013. Minimum wages: a view from the UK. Perspektiven der Wirtschaftspolitik, 14(1-2), pp.57-66.

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