A Note on the National Minimum Wage Debate – IELTS Reading

Kasturika Samanta

13 min read

Updated On Nov 10, 2023

Reading Passage
Answers of A Note on the National Minimum Wage Debate Reading Answers with Location and Explanation
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The Academic Reading passage, A Note on the National Minimum Wage Debate, consists of 14 questions and presents three different types of questions, which are:

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Reading Passage

You should spend 20 minutes on Questions 1-14, which are based on the Reading Passage below.

A Note on the National Minimum Wage Debate

A Much of the literature on the minimum wage has as its main theme the question of whether or not the introduction of a national minimum wage reduces employment. The empirical evidence on this point comes mainly from America and is contradictory and inconclusive. This does not, however, prevent the political debate from using the economic evidence. Advocates from both sides do so, with some rhetorical force, despite its contentious nature.

B The proposition that jobs might be destroyed by higher wages follows directly from neo-classical economic theory. However, the empirical studies display findings that are rather milder than theory ‘would expect. A review of such studies by Card and Krueger (1995) concluded that minimum wages ‘had no effect on employment; this despite the evidence of Neumark and Wascher (1992) that the negative effect comes through strongly when teenagers are isolated in the sample. This notion was supported by a later study which showed that teenagers were more likely to be enticed away from education by the higher wages ensuing from statutory minimum wage legislation (Neumark and ‘Wascher 1995).

C Critics of neutral and slightly positive evidence claim that studies cannot, by definition, take account of companies driven out of business by minimum wages. Whilst this is true, a more substantial criticism of the literature would be the dearth of studies based on local labour markets and on those of specific industries. Such studies as exist show a clearer picture – which could be summarised as demonstrating a small negative effect on jobs, but, more importantly, showing the strategic processes which managers use to cope with an imposed rise in the price of labour. Certain types of service industry, for example, can show positive employment effects (Alpert 1986).

D The irony here is that the best evidence is furthest away from the political debate, which, by its very nature, uses a national perspective. Unfortunately, the contentious nature of the evidential base, which is so unhelpful to the jobs argument, permeates into other areas. For example, if the jobs argument is unresolved, then those arguments surrounding the saving to be made on the payment of social benefits to low paid workers hardly get off the ground, because, if jobs are destroyed, unemployment benefit costs rise and offset the savings on income support. Critics of the minimum wage would, of course, argue that it only benefits people who have a job and, therefore, does nothing for unemployment. Advocates, on the other hand, would contend that income support benefits are a wasteful subsidy to bad employers who are, in effect, gaining a competitive advantage over ‘more responsible’ employers. In this argument, the minimum wage would encourage better market functioning and more competitive conditions than the subsidies that prop-up bad employers. They would go even further and point to continental Europe, where minimum wage statutes abound, to suggest that minimum wages are an incentive to develop training. Exactly why this should be so escapes British management, who appear to need a better translation of the text of this argument. However, one point that is well understood is that a national minimum wage could cause a run of differential- maintaining pay claims. The fact that the beneficiaries of a minimum wage usually lack bargaining power (Lucas 1995) and that they are unlikely to be a ‘reference group’ for any sector of organised labour, takes the edge off this argument.

E The EEC has recently tossed a new coin into the ring: the notion of maximum working hours per week. So far this has not touched the minimum wage debate, but the connection is inevitable. A new set of arguments about overtime and shorter hours is about to break through. Whether the poor can best be helped by a minimum wage, or a maximum working week, is a matter for empirical evidence. Whatever the evidence is, it will not stop the political debate from maintaining a national perspective. This is a pity, because an increment for the poor does not go on luxury items and foreign holidays. It is spent on the home and on small scale leisure activities in the local market. Furthermore, if adjustments in taxation to help small business through a sudden rise in labour costs are contemplated, they are best executed through local rather than national government. To paraphrase an American political slogan: it’s the local economy stupid.

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Questions 1-4

Use the information in the text to match the authors (A-D) with the Findings (1-4) below.

Write the appropriate letters (A-D) in Boxes 1-4 on your answer sheet.

A Neumark & Wascher

B Alpert

C Lucas

D Card & Krueger

Findings

1 The economic influence of those who would benefit most from a minimum wage is not great enough to affect wage differentials.

2 A minimum wage does not influence the number of people who find employment.

3 The beneficial effects of a minimum wage have been observed in some service industries.

4 A minimum wage appears not to have a positive impact as regards teenagers.

Questions 5-11

The diagram below summarizes some of the main points on the minimum wage provided in paragraphs B-D.

Complete the diagram with information from the passage.

You may use NO MORE THAN THREE WORDS to fill each blank space.

Write your answers in Boxes 5-11 on your answer sheet.

Note: The questions mentioned in the image above are from (33-39). which should actually be numbered as (5-11). So, solve the questions accordingly.

5 ……………………………..

6 ……………………………..

7 ……………………………..

8 ……………………………..

9 ……………………………..

10 ……………………………..

11 ……………………………..

Questions 12-14

Choose the appropriate letters A-D and write them in boxes 12-14 on your answer sheet.

12 Critics of the minimum wage argue that …

A it makes services more expensive.

B it only helps those already in work.

C it causes inflation.

D it affects exports.

13 According to the writer, the fiscal counterbalance to increased costs should be …

A at national level.

B through Income Tax.

C through VAT.

D at local level.

14 There is a lack of studies based …

A on international industries.

B on the national economy.

C on local labour markets.

D on specific locations.

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Answers of A Note on the National Minimum Wage Debate Reading Answers with Location and Explanation

Find the answers and detailed explanations of the questions in the Reading Answers of A Note on the National Minimum Wage Debate and get an idea of how to improve your IELTS preparation further.

1 Answer: C

Question type: Matching Features

Answer location: Paragraph D, Line 9 – Line 10

Answer explanation: The specified lines of the fourth paragraph tell us, “However, one point that is well understood is that a national minimum wage could cause a run of differential- maintaining pay claims. The fact that the beneficiaries of a minimum wage usually lack bargaining power (Lucas 1995) and that they are unlikely to be a ‘reference group’ for any sector of organised labour, takes the edge off this argument.”. So, it can be concluded that Lucas opines that the economic influence of the people who would benefit (beneficiaries) from the minimum wage is less likely to affect the differential of wages as they lack bargaining power. Hence, the answer is C (Lucas).

2 Answer: D

Question type: Matching Features

Answer location: Paragraph B, Line 3

Answer explanation: In the specified line, it is stated that “A review of such studies by Card and Krueger (1995) concluded that minimum wages ‘had no effect on employment…”. This shows that according to Card and Krueger, the minimum wage does not have any effect on the number of employed people (employment). Hence, the answer is D (Card & Krueger).

3 Answer: B

Question type: Matching Features

Answer location: Paragraph C, Line 4

Answer explanation: In the mentioned paragraph, it is given that “Certain types of service industry, for example, can show positive employment effects (Alpert 1986).”. It can be inferred that Alpert pointed out that some (certain) service industries have observed the beneficial effects of a minimum wage (positive employment effects). Hence, the answer is B (Alpert).

4 Answer: A

Question type: Matching Features

Answer location: Paragraph B, Line 3

Answer explanation: The second paragraph mentions “…the evidence of Neumark and Wascher (1992) that the negative effect comes through strongly when teenagers are isolated in the sample.”. It points out that Neumark and Wascher figured out that minimum wage does not have a positive impact (negative effect) when it is focused on teenagers (teenagers are isolated in the sample). Hence, the answer is A (Neumark & Wascher).

5 Answer: low paid workers