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Income Increase and Mobility of Labor

Question

Discuss whether or not the 🍃Introduction of a national minimum wage will reduce poverty. In assessing each answer, use the table opposite. Why it might:

Category:

Labor Market and Income Distribution

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Preview Answer

I. 🍃Introduction
- Definition of minimum wage
- Importance of minimum wage in reducing poverty

II. Pros of increasing minimum wage
- Low-paid workers may be better paid
- Higher income may enable people to buy basic necessities
- Reduce absolute poverty
- Pay gap between high-income and low-income workers may be reduced, lower relative poverty
- Higher pay may increase spending, creating more jobs and income
- Higher tax revenue may enable the government to spend more on reducing poverty
- Higher wages may increase productivity which could encourage firms to hire more workers.

III. Cons of increasing minimum wage
- May be set below current low pay and so have no effect
- May result in some workers losing their jobs
- Unemployed will have lower income
- May discourage MNCs operating in the country
- Does not help people who are poor because of age, unemployment or sickness
- May result in inflation, leaving purchasing power/real wages unchanged.

IV. 👉Conclusion
- Summary of pros and cons
- Importance of considering both sides before making a decision.

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