What kind of effect would a national minimum wage have, is it positive or negative ?

A national minimum wage sets the minimum hourly wage rate that is acceptable by law. It is needed for a variety of reasons.

It has several advantages including reducing poverty and reducing gap between rich and poor. It increases the incentive for people to work, reducing unemployment and money spent by the government on benefits such as JSA. It also increases tax revenue, through income tax (increased income) and consumption tax (people buying more because more money to spend).Which helps improve the economy overall. However, it can have detrimental effects on the economy.It can lead to an increase in unemployment, due to companies trying to reduce costs, they can do so by reducing in investment in training. And also, workers who earn higher can ask for a wage increase to reduce differential. It can lead to demand pull inflation in the economy.

The effect the National minimum wage has depends largely on , firstly, is it set above the equilibrium wage, as if its not then it would have no effect. Secondly, is the demand for workers elastic or inelastic.It is likely to be inelastic in the short run as workers cannot be substituted for machines and thus, it will have a positive effect. Overall, evidence in the UK tends to show that national minimum wage has supported the low paid.