<Criminal Law Essays and Dissertations

The effect of minimum wage on unemployment in the UK

Extract 1 : History of the National Minimum Wage
Extract 2 : Labour Market Impact
Extract 3 : Literature Survey
Extract 4 : Survey
Extract 5 : Results and Analysis

The Survey

Research Methodology:

Data Set:

  • We have used the unemployment data between 1987 -2002 on unemployment these data are raw data and do not give any sector wise, gender wise or racial analysis of the unemployment. It provides a gross overview on the trend in unemployment from 1987-2002
  • For the National Minimum Wage we have used data between 1999-2002 for low volume of the information as the National Minimum Wage law came into effect since 1999. Here we are using the hourly data for people aged over 22 years for the tabulation. The data regarding people under the age level of 22 have not considered for the analysis.

Methodology

  • We have used the raw data to figure out the general trend in the changes in the numbers of unemployed people in the UK. The trend helps up to identify the pattern of the unemployment levels in the UK before the introduction of the National Minimum Wage Bill 1998 and after the introduction of the bill on the level of unemployment. The study will help us to concentrate on the factor of National Minimum wage considering that the other factors of unemployment have remained constant over this period.
  • We use the data between 1999-2002 to find out the trend in the general level of unemployment in UK .The current unemployment includes the factor of National Minimum Wage in the numbers of unemployment .
    The trend in this period of time as compared to 1987-1998 includes the additional factor of minimum wage, which we try to figure out in the research.
  • We find out the standard deviation in the unemployment during the period of 1987-2002 to have an idea about the aspersions caused in the numbers by all the factors behind unemployment .The standard deviation will provide us a chance to figure out the extra source of dispersion that may have been introduced through the introduction of National Minimum Wage bill 1998.
  • We put the figures of the unemployment during the period of 1999-2002. We try to find out the trend in the general level of unemployment during this period and compare it with the trend line created from the date between the 1987 to 2002 to figure out any perceivable changes that may have taken place due to the introduction of the National Minimum Wage into the employment system .In case of any change we try to find out the causes in the change .We try to know the extent of the change is brought over by the National Minimum Wage and also to locate any other factors that may have influence the trend during the figure to be specific on the effect of the National Minimum Wage .
  • We find out the standard deviation the unemployment number during 1997-2002 .By the standard deviation we try to find out the general changes that have taken place in the unemployment level including the National Minimum Wage factor. This figure compared to the figures we get from out figures for the period 1987-2002 will offer us to find out the dispersion caused by the National Minimum Wage during the period between 1999-2002 on the aggregate level of unemployment.
  • We find out the standard deviation in the unemployment level during the period 1999-2002 .The Figures are compared to the standard deviations during the period of 1987-2002. This comparison can give us a brief idea about the effect of National Minimum wage on the aggregate level of unemployment .We also try to see this dispersion as the initial source of the relationship that may have existed between the twp parameters namely the Unemployment & the National Minimum Wage.
  • We compare the results between the changes in the unemployment in terms of standard deviations and try to find a pattern in them to factorise any changes that may have taken place other than National Minimum Wage Factor. We also do not discount the possibility of the existence of the other factors that may have affected the level of dispersion during the period 1999-2002. The Comparison of the results between the figures of dispersions between 1987-2002 and the period 1999-2002 have shown a very huge difference in the levels of dispersion during the two periods. Assuming other things remaining same, we could stay that there is a relation between the National Minimum wage and the aggregate level of Unemployment in UK.
  • We further include the Nationally Minimum Wage into the set of factors .We see the trend in the changes in the hourly rates of National Minimum Wage. We try to find any pattern in itself to suggest the changes in the numbers. We try to see that the trends in the aggregate level of unemployment and of the national Minimum Wage to find out the similarities that may have between the lines .we mean that with the increase of the National Minimum Wage, what happens to the trend line of the aggregate unemployment data trend. Does it change from the initial trend as found during the period 1987-2002? Here we again compare the trends in the aggregate level of unemployment's during the two periods with an eye on the changes that may have taken place in the National Minimum Wage and try to compare the trends along with the trends in the National Minimum Wage.
  • To find out the relation between the relation between the aggregate unemployment during the period of 10999-2002 and the National Minimum Wage during the same period, w e find out the correlation between the hourly National Minimum Wage and the Unemployment numbers, to predict the interdependence of these factors. And the level of interdependence .we also try to ascertain the type of correlation exist between these two factors .Is the correlation between the two factors are positive or negative. What is the magnitude of this positive or negative relationship? What is the level of significance of their relationship to describe the relationship between the two factors or the effect of the national Minimum Wage on the aggregate level of unemployment?
  • We find out the covariance between the hourly National Minimum Wage and the Unemployment numbers to find out the relationship between these two factors and the way the level of the covariance of the two factors to understand the level of dispersions that may have existed between the two factors and the way the dispersions are taking place on a broader scale including these two factors.

Changes in the Unemployment between 1987-2001

Year
Total Unemployment in millions
1987
3012.4
1988
2484.1
1989
2074.9
1990
1973.8
1991
2413.6
1992
2769.2
1993
2935.5
1994
2737.6
1995
2460.4
1996
2340.1
1997
2037.3
1998
1776.4
1999
1386.4
2000
1619.1
2001
1412.9

Source :International Labour Organization: 2002

The Trend in the unemployment between 1987-2001

Changes in the National Minimum Wage between 1999-2002

Year
National Minimum Wage: Hourly Data in £
1999
3.6
2000
3.7
2001
4.1
2002
4.2

The trend in the National Minimum Wage Data:

The Relationship between the National Minimum wage and Unemployment 1999-2002

The Covariance between the two parameters: -37.68
The Correlation between the two variables: -.68679
The standard deviation of the unemployment between 1987-2002
The standard deviation of the unemployment between 1999-2002: 248.47
The Kurtosis of the unemployment data between 1999-2002: 1.929

Bibliography

International Labour Organization Survey Reports 1987:2002

The Report from the Inland Revenues 1999:2002

The National Commission for the Minimum Wage Reports 1999:2002.

Research Methodology: Greene & Taal

OCED Reports on United Kingdom: 1990:2002

Extract 1 : History of the National Minimum Wage
Extract 2 : Labour Market Impact
Extract 3 : Literature Survey
Extract 4 : Survey
Extract 5 : Results and Analysis

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