We will see that how minimum wage rates are determined by the various factors such as unemployment/employment position, geographical locations, skills of the employees or skills required for a particular job, respective governments level of intervention. In this essay we tried to explain all these conditions with reference to UK labour market. We focused on UK because recent policy and legislation changes regarding minimum wages converted this country into a more flexible and effective labour market.Introduction: Wages are one of the most important aspects of labour economics.In the following essay, we will consider how the labour market operates. In particular, we will focus on the determination of minimum wages rates in different type of markets. Due to wider changes in business environment one thing is for sure that these changes are affecting the wages structure. Nowadays, due to fast technological changes especially in the field of telecommunication and computers geographical boundaries are diminishing and the mobility of labour force has increased manifold. This mobility destabilizes the demand and supply of labour, which ultimately affect the wages. The labour market has undergone great change in recent years. Advance in technology, changes in the pattern of output, a need to be competitive in international markets and various social changes have all contributed to changes in work practices and in the structure and composition of the workforce.
Major changes in the UK include the following:
1. A shift from Agriculture and Manufacturing to Service sector employment. The fall in manufacturing employment, however, has been more recent, starting in the 1960's and gathering pace through the 1970's, 1980's and 1990's. By contract, employment in the service industries has grown steadily since 1946. In fact since 1979, it has expanded by over 5 million jobs.
2. A rise in part time employment, and a fall in full time employment. In 1971, a one in six worker was part-time; by 2003 this had risen to one worker in four. The fall in the proportion of full-time employees closely mirrors the decline in manufacturing, where jobs were more likely to be on a full-time basis. At the same time, the growth in part time work reflects the growth in Service sector where many jobs are part time. Since 1979 part time employment has risen by over 2.2 millions.
3. A rise in female participation rates: Women now constitute approximately half of the paid labour force. The rise in participation rates in strongly associated with the growth in the service sector and the creation of part-time position. Nearly half of all female workers, about 6.3 million are the part-time worker.
4. A rise in proportion of workers employment on fixed-term contract or on a temporary or casual basis. Many firms nowadays prefer to employ only their care workers / managers on a permanent (continuing) basis. They feel that it gives them more flexibility to respond to changing market conditions to have the remainder of their workers employment on a short-time basis and perhaps, to make use of agency staff is to contract out work (Employment in different sector of the UK economy, European Historical Statistics by B.R. Mitchell (Macmillan Press); Labour Market Trends, National statistics, various editions).
Labour demand and supply in different market: It has become very fashionable in recent years for companies to 'trim' the numbers of their employees in order to reduce costs but, however a growing consensus that the process may have gone too far. When looking at the market for labour, it is useful to make a distinction between perfect and imperfect markets. Although in practice few labour markets are totally perfect, many do at least approximate to it. In the perfect market, everyone is a wage taker. Neither employers nor employees have any economic power to affect wage rates. The other assumptions of a perfect labour market are as: Freedom of entry i.e. there