Whether a National Minimum Wage Reduces Relative Poverty

Since The introduction of the NMW low paid employees have seen an increase in the wage as companies are obliged to pay employees the minimum wage. To some extent this has helped since the lowest paid workers have noticed a considerable increase in their income, reduce poverty. Where salaries tended to be reduced, this is more widespread in the North; the NMW has affected fewer jobs in the south. However it is worth noting that the weakest sections of society have a tendency to be people on benefits like JSA and incapacity benefits, therefore these groups would not benefit from a NMW. Also many on the NMW could be second income earners, the spouse of a principal breadwinner. Therefore as being poor these households might be well off and would notclassify. This is a limitation in reducing poverty of the NMW.Another Concern about the NMW is that if it had been increase unemployment may be caused by it. According to theory that and rise in the NMW will lead to wage unemployment.

Minimum Wage

If it had been inelastic a bit would increase, Scope of unemployment could depend upon the elasticity of demand for labor. That this could have the effect of increasing poverty as opposed to reducing it if there was an increase in unemployment. . This issue may be most likely to occur in businesses with areas and low profit margins where equilibrium wages are normally low.However Companies may have Monopsony power although Evidence indicates that UK labor markets are not perfectly competitive. This is particularly part time service industry jobs where employees have rights and union representation. If employees face Monopolist a greater Minimum wage might not cause unemployment in certain cases it may decrease

Empirical Evidence suggests that raising the NMW does not cause unemployment to grow suggesting this version is more accurate than the perspective. It will depend upon how much the NMW is raised. It is probable that some labor markets will be more aggressive than others the effect may differ for different businesses.Other Positive advantages of the NMW include the fact that it may increase the incentive for the unemployed to find a job as opposed to remain on benefits, however the JSA is rather low and the difference between benefits and work is quite high already.In Conclusion paid their earnings to rise, thereby reducing poverty. A concern about a Salario Minimo rise is that in certain labor markets wage unemployment may be caused by it. Evidence suggests that the growth would need to be significant in order for this to happen because labor markets are generally uncompetitive. There might be a case for rising in the south thereby reducing poverty.