About Barack Obama´s Plan to Raise the Minimum Wage in the USA – 5

The minimum wage was introduced in the United Kingdom in 1998 with the National Minimum Wage Act 1998 that took effect on 1 April 1999. And the experiences with the minimum wage in the UK have been positive.

See for the experiences with the minimum wage in the UK for example the article “Why Has A Higher Minimum Wage Increased Employment in the UK?” on the website “Economics Help” of Teyvan R. Pettinger.

See for this also the article on the website of The Economist: “Free exchange: The argument in the floor” (9/24/2012).

The authors of this article remark: “Economists have tended to oppose minimum wages on the grounds that they reduce employment, hurting many of those they are supposed to help. Milton Friedman called them a form of discrimination against low-skilled workers. In standard models of competitive markets, anything that artificially raises the price of labour will curb demand for it, and the first to lose their jobs will be the least-skilled workers. (….).

Britain’s experience offers another set of insights. The country’s national minimum wage was introduced at 46% of the median wage, slightly higher than America’s. A lower floor applied to young people. Both are adjusted annually on the advice of the Low Pay Commission. Before the law took effect, worries about potential damage to employment were widespread. Yet today the consensus is that Britain’s minimum wage has done little or no harm.

The most striking impact of Britain’s minimum wage has been on the spread of wages. Not only has it pushed up pay for the bottom 5% of workers, but it also seems to have boosted earnings further up the income scale—and thus reduced wage inequality. Wage gaps in the bottom half of Britain’s pay scale have shrunk sharply since the late 1990s. A new study by a trio of British labour-market economists (including one at the Low Pay Commission) attributes much of that contraction to the minimum wage. Wage inequality fell more for women (a higher proportion of whom are on the minimum wage) than for men and the effect was most pronounced in low-wage parts of Britain”.

This article “Free exchange: The argument in the floor” (9/24/2012) includes a chart of minimum wages in different countries provided by the OECD.

Arguments for raising the minimum wage in the USA are also provided on the webpage “The Job Loss Myth” of the website “Raise the Minimum Wage“.

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