Tuesday, June 12, 2007

Case for Regional minimum Wage

Can you explain the case for regional variation in the NMW and what other types of questions should i prepare for?

Wages vary throughout the economy. e.g. in London, average wages are higher than in North

A NMW of £5.35 may be above the equilibrium wage rate in the north and therefore cause unemployment

Therefore, lowering the NMW in the north may a rise in employment, especially in low wage industries,

In London a NMW of £5.35 may be too low to have any effect.

Living costs are higher in London so NMW should be higher to reflect this. Without higher London NMW, workers may not be able to afford to live and therefore will move up north.

However evaluation

1. Becomes more difficult to enforce and administer

2. Little evidence NMW has caused much unemployment in the north.

3. Unemployment benefits are the same for different areas. Therefore, there is still same incentive to get a job rather than be unemployed.

Does a Minimum Wage reduce Relative Poverty

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