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Discuss the possible effects of increasing the minimum wage from the current £4.85 to the level of £5.30 as recommended by the Trade Unions Council (TUC) and of the Europeans Commissions proposals to limit the length of the working week.
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Discuss the possible effects of increasing the minimum wage from the current £4.85 to the level of £5.30 as recommended by the Trade Unions Council (TUC) and of the Europeans Commissions proposals to limit the length of the working week. The efficiency wages hypothesis defined by John Sloman (2004, p179) "states that the productivity of workers rise as the wage rate rises." In business, the efficiency wages are set where they maximise the profitability of the workforce to improve morale, reduce labour turnover and have employees working harder because it will be costly for the worker if they were to be dismissed due to the high pay levels. The increase in minimum wage will have different impacts depending on the type of market. In perfect competition, the firms are price takers so they cannot change the price of the products as they are homogeneous. If they cannot increase their profit margin...
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