The present paper aims at evaluating minimum wage laws. In order to reflect the topic, two countries – Germany and the United Kingdom –, which have already introduced minimum wages, are chosen as examples. Furthermore, the paper examines minimum wages from the perspective of two different economic theories on government intervention by introducing the neoclassical and the Keynesian approach. It investigates the observed actual impact and effectiveness of minimum wage legislation against the presented market theories as well as against the objectives and expectations raised by the legislation. Finally, the student paper gives a recommendation whether the introduction of minimum wages is actually worthwhile or not.
The paper starts with a definition of the problem and introduces objectives as well as current relevance of the topic. Subsequently, the theoretical background is reflected. This includes the definition of the term minimum wage as well as presenting the neoclassical and the Keynesian economic theory. Chapter two finally ends with a short summary. Afterwards, the paper continues with Chapter three, which describes the minimum wage concepts of Germany and the United Kingdom.
Therefore, the implementation track records explain the history, structure and the scope of the different minimum wage concepts. The critical discussion in chapter four finally evaluates the observed actual impact and effectiveness of minimum wages against the economic theories. Furthermore, it reflects the expectations and objectives which are raised by the government. The paper concludes with a summary and an outlook.
Table of Contents
1 Introduction
1.1 Problem definition
1.2 Objectives
1.3 Structure of the paper
2 Theoretical background
2.1 Definition of the term minimum wage
2.2 Minimum wage in the neoclassical macroeconomic theory
2.3 Minimum wage in the Keynesian macroeconomic theory
2.4 Summary
3 Minimum wage laws in Germany and the United Kingdom
3.1 Minimum wages in Germany
3.1.1 History
3.1.2 Structure
3.1.3 Coverage
3.2 Minimum wages in the United Kingdom
3.2.1 History
3.2.2 Structure
3.2.3 Coverage
4 Critical discussion
5 Summary and outlook
Objectives and Topics
This paper aims to evaluate minimum wage laws by analyzing their implementation in Germany and the United Kingdom, specifically investigating how these regulations perform when viewed through the lenses of neoclassical and Keynesian economic theories.
- Comparison of minimum wage systems in Germany and the UK.
- Analysis of government intervention via neoclassical market models.
- Examination of the Keynesian approach regarding aggregate demand and labor.
- Evaluation of empirical impacts on employment and income distribution.
- Strategic recommendations for future minimum wage legislation.
Excerpt from the book
2.2 Minimum wage in the neoclassical macroeconomic theory
The neoclassical market theory was developed in the late 19th century and replaced the school of classical economics. Classical economists focus on the price mechanism. As Koch describes, they belief that “the volume of goods produced and goods purchased would always balance out each other” (Koch, 2019, p. 9). This is often described as an “invisible hand”. It also includes the fact that governments should not intervene in the market system through controls on prices or quantities (Koch, 2019, p. 9). Neoclassical economists modernized this model by focusing on all markets in a national economy. Some of the most important representatives of this theory were the economics William Stanley Jevons and Leon Walras (Bundeszentrale für politische Bildung, n.d.). They are convinced that every market in a national economy would reach a state of general equilibrium. Moreover, the neoclassical economy is also called supply-side economics. This is, because it focuses especially on producers, growth and employment (Koch, 2019, p. 9). According to the growth theory of neoclassic, the level of productivity increases with rising the amount of goods and services produced (Koch, 2019, p. 18). Furthermore, the theory concentrates on the individuals and their economic decisions made at the margin. In this context, proponents of the theory try to describe such decision making by mathematical models and statistics (Koch, 2019, p. 9). Therefore, several assumptions have to be made. The most important ones in this case are the belief that individuals always want to maximize their utility and that every human being acts rationally when it comes to making economic decisions.
Summary of Chapters
1 Introduction: Provides a problem definition regarding minimum wage introduction and outlines the objectives and structure of the paper.
2 Theoretical background: Defines the term minimum wage and analyzes it through both neoclassical and Keynesian macroeconomic theories.
3 Minimum wage laws in Germany and the United Kingdom: Details the historical development, structural frameworks, and coverage of minimum wage legislation in both countries.
4 Critical discussion: Evaluates the actual impact and effectiveness of the minimum wage systems in Germany and the UK against theoretical expectations.
5 Summary and outlook: Synthesizes the findings and provides a concluding recommendation on the implementation of minimum wage policies.
Keywords
Minimum Wage, Neoclassical Economics, Keynesian Economics, Labor Market, Unemployment, Germany, United Kingdom, Low-pay sector, Wage floor, Government intervention, Aggregate demand, Economic policy, Employment, Remuneration, Multiplier effect
Frequently Asked Questions
What is the core focus of this academic paper?
The paper evaluates the effectiveness of minimum wage laws by comparing the approaches taken in Germany and the United Kingdom, specifically testing them against neoclassical and Keynesian economic theories.
What are the primary thematic fields addressed?
The key themes include the definition of minimum wages, the historical context of their implementation in Germany and the UK, and the analysis of labor market dynamics through different economic schools of thought.
What is the main objective of the research?
The goal is to determine whether the introduction of a minimum wage is worthwhile by comparing observed empirical impacts against the theoretical predictions and legislative objectives of the governments involved.
Which scientific methods are employed?
The paper utilizes a comparative analysis of two different national case studies and evaluates them through the framework of macroeconomic theories, specifically neoclassical and Keynesian models.
What topics are discussed in the main body?
The main body covers the theoretical foundations, a detailed track record of German and British wage legislation, and a critical discussion of the socio-economic impacts on employment and wages.
Which keywords best characterize this work?
Essential keywords include Minimum Wage, Neoclassical Economics, Keynesian Economics, Labor Market, Unemployment, and Economic Policy.
How does the UK's approach to the Low Pay Commission differ from the German commission?
While both commissions aim to provide recommendations to the government, the UK’s Low Pay Commission is tasked with investigating specific topics and demographics assigned by the parliament each year.
Does the empirical data support the neoclassical prediction of higher unemployment due to minimum wages?
No, the paper notes that in both Germany and the UK, the introduction of minimum wages has not led to the mass unemployment predicted by neoclassical models; instead, employment has often continued to grow.
What is the "multiplier effect" mentioned in the Keynesian context?
Keynesian economists use this term to explain how an increase in wages for low-paid workers leads to higher purchasing power and demand for goods, which subsequently drives up production and employment.
- Arbeit zitieren
- André Müller (Autor:in), 2020, Evaluating Minimum Wage Laws, München, GRIN Verlag, https://www.grin.com/document/903343
