Extended Response – (Annabel Jade)

Resource Description

Analyse the effect of an increase in the minimum wage in the labour market on the economy. Include in your analysis the likely impact on labour market institutions. Intro: Introduction to labour markets and NMWThe Australian Government aims to achieve positive and stable economic growth, internal balance – price stability and full employment, and external stability through its labour market policies. Australia’s current industrial relations framework has progressed to become increasingly decentralised, with more emphasis being placed on enterprise bargaining in order to achieve favourable labour market outcomes. In maintaining price stability, adjustments are often made by the Fair Work Commission to the National Minimum Wage to help contain wage costs and inflation between the 2-3% target set by the RBA as a basis for conducting monetary policy. Decisions to change minimum wage is often aligned with its predicted outcome to inflation, as it is important that the economy does not grow at a level of instability where excessive wages growth inhibits the operation of businesses, leading to a recession in the economy. Changes in minimum wage significantly impact on labour market institutions, especially in negotiating wage outcomes and conditions that suit the interests of both the employees and employers. As a contentious issue, economists argue that an increase to the national minimum wage poses both positive and negative ramifications on the economy.