Increase In Minimum Wage

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Will an Increase In Minimum Wage Affect Small Businesses in UK?

Will an Increase In Minimum Wage Affect Small Businesses in UK?


I think that an increase in minimum wage will affect small businesses in the United Kingdom. First of all let me mentioned something about minimum wage. The minimum wage is the lowest salary that governments allow employers to pay employees. Most of the nations in the world have minimum wage laws. In the European Union, 18 of the 25 member states enforce national minimum wages. Many other countries, including Austria, Denmark, Finland, Italy, Germany, Norway, Sweden, and Switzerland, have no minimum wage laws, but have strong trade unions, which set minimum salaries through collective bargaining.

Dan and Doris (2003) mention supporters of minimum wage laws believe that it is a matter of social justice, that the minimum wage helps reduce exploitation of workers and ensure that workers can afford the basic necessities of life. Detractors of the minimum wage, which include most members of the American Economic Association, contend that a minimum wage increases unemployment among low-wage workers and harms the poorest workers. In particular, researchers indicate that increases in the minimum wage increase the unemployment rate among the teenage African-American community (Dan and Doris, 2003). Detractors of the minimum wage believe that employers and employees should be able to negotiate a price for labor independent of government interference.


Economists are divided on the impact of a minimum wage on labor markets and the economy. Neoclassical economists oppose establishing minimum wage rates and, by extension, any increases to them. They report that artificially raising wages above the law of supply and demand hurts those it is intended to benefit by increasing unemployment, contributing to inflation, and discouraging business investment and growth. The extra labor costs force employers to hire fewer low-skilled employees and/or increase their prices (Dan and Doris, 2003). Some employers offset minimum wage increases by reducing other employee benefits. Minimum wage increases attract middle-class teenagers into the labor market, which creates more competition for low-skilled adults seeking employment.

In response, economists supportive of minimum wage increases report that higher hourly wages have little or no effect on unemployment rates and actually stimulate economic growth by increasing the purchasing power of low-income employees. At the same time, recipients of higher minimum wages reduce their dependence on financial assistance from the government.

Although there is no formula for determining optimal distributions of income, and some uncertainties as to whether unrestrained markets will generate progressively more inequalities, there is little doubt that institutional, and hence, political configurations will play a critical role in shaping the manner in which markets exacerbate inequalities or attenuate them. In other words, constraining market forces is a social and political process, involving a struggle to establish regulation (Samuelson & Nordhaus, 2004). Minimum wages can represent a powerful tool for improving the material conditions of those in 'outsider' categories of the labour market; those employed in peripheral occupations, in small businesses, younger workers, subcontractors, and those in the ...
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