Does a higher NMW increase the distribution of income?

This depends on a multitude of factors and is tricky to answer.

One of the ways in which a higher NMW, which the latest government is implementing, would reduce inequality, is simply because it raises wages of those in lower income families. This increases their disposable income and therefore their standard of living should rise.

However, this is not always the case; for two main reasons. The first of which is that around 40% of those on the NMW are secondary earners of richer households! Therefore money is not being efficirntly transferred from high earners to low earners.

Additionally, classical economists would argue that a wage floor leads to higher unemployment levels, as the cost of labour rises so firms will cut back on labour to lower costs. Therefore this would worsen the situation.

The answer to this question also depends upon the effects on productivity

Thomas  W. A Level Economics tutor, GCSE Economics tutor

1 month ago

Answered by Thomas , an A Level Economics tutor with MyTutor

Still stuck? Get one-to-one help from a personally interviewed subject specialist


PremiumAkshay D. A Level Economics tutor, GCSE Geography tutor
View profile
£26 /hr

Akshay D.

Degree: Finance Accounting & Management BSc (Bachelors) - Nottingham University

Subjects offered: Economics, Geography


“About Me: - A Second Year Student studying Finance Accounting & Management  - Tutored Economics and Geography in the past to younger students.  - I am a trust worthy individual who will provide a first class high quality service to e...”

Anish P. A Level Maths tutor, GCSE Maths tutor, A Level Economics tutor
View profile
£20 /hr

Anish P.

Degree: Mathematics with Economics (Bachelors) - LSE University

Subjects offered: Economics, Maths


“About me: I'm currently studying Maths with Economics at the London School of Economics and Political Science (LSE). I recently finished my A-Levels in Maths, Further maths and Economics achieving A*AA. I have mentored students at sch...”

George H. A Level History tutor, 13 Plus  History tutor, GCSE History...
View profile
£20 /hr

George H.

Degree: BA History (Bachelors) - Oxford, Lincoln College University

Subjects offered: Economics, Latin+ 4 more

-Personal Statements-
-Oxbridge Preparation-

“About me: Hello, my name is George and I'm an undergraduate reading History at Oxford. My aim is to be as approachable and patient as possible, explaining concepts with as much clarity as needed and encouraging you to have confidence ...”

About the author

Thomas  W. A Level Economics tutor, GCSE Economics tutor
View profile
£20 /hr

Thomas W.

Degree: Philosophy, Politics and Economics (Bachelors) - Warwick University

Subjects offered: Economics


“About me Hello, my name is Tom and I read PPE (Philosophy, Politics and Economics) at Warwick, achieving A*A*A at A level in Maths, Economics and Biology respectively. I can't recall a time where i have not been fascinated bycurrent ...”

You may also like...

Posts by Thomas

Does a higher NMW increase the distribution of income?

What is economic growth and how can it improve living standards?

Other A Level Economics questions

What is fiscal policy?

The government has introduced an ad valorem tax on petrol. The likely effect is: A) Increase in sales of petrol B) Increase in carbon emissions from electric cars C) Increase in demand for bus travel D) Decrease in sale of electric cars

What is the Current Account

What is the best method of structuring an Economics Essay

View A Level Economics tutors


We use cookies to improve our service. By continuing to use this website, we'll assume that you're OK with this. Dismiss