A national minimum wage (NMW) is the lowest hourly pay rate that employers are legally required to pay their workers. It acts as a price floor established by the government within the labour market.

The main goals are:

• To protect low-paid workers from being exploited.
• To help reduce poverty and unfair wage gaps.
• To ensure workers can afford a basic standard of living.

Impact on the labour market:

• If the NMW is set higher than the market wage, it may lead to fewer jobs (a disemployment effect) because companies might hire fewer people.
• If the NMW is set lower than the market wage, it has no real impact, as workers are already being paid more than the minimum.
• While the NMW helps those who keep their jobs, it might make it harder for the lowest-skilled workers to find employment.

Key consideration: The actual effect on jobs depends on the elasticity of labour demand. If demand is inelastic, job losses will be small; if demand is elastic, there could be a significant decrease in available jobs.