Minimum wages: possible effects on the distribution of income

<p>Since the 1980s, there has been increased interest among unions and two opposition parties in the possibility of introducing a national minimum wage (NMW). The central argument for a minimum wage is a social justice one: a minimum wage is deemed necessary to prevent some employers exploiting workers with little bargaining power by paying them less than the value of the goods and services they produce. The aim of this paper is to establish what sort of people might be affected by a minimum wage, how this might have changed over time and how far a minimum wage can be used as a tool to redistribute income from the rich to the poor. No attempt is made to simulate the effect of a NMW on employment and prices, and obviously any complete analysis needs to take these effects onto account. Recent research (see the discussion below) on this issue, however, indicates little evidence that a 'moderate' minimum will have any effect on employment and it is thus likely that the 'First-round effects' described in this paper are informative.</p>