Economics

A Monetary union is an agreement between states with two important components being trade bloc and common market. It is a part of economic integration, i.e., its main purpose is to increase trade among participating states by eliminating in part or wholly the tariffs and borders. This leads to a lot of cost related and other benefits to members. The monetary union helps enhance trade within all the members in a very similar fashion like that taking place within the states itself. 

European Monetary Union (EMU)
The evolution of EMU involved three steps which are illustrated as (Baldwin,  Charles 2004)
StageBeginning dateComponents1st1st July 1990Free capital movement
Increasing Structural funds aimed at eliminating inequalities between members of the region
Formation of Economic union through analyzing the policies of member states2nd 1st January 1994European Monetary Institute was formed which comprised of Central Bank Governors of the member countries

National Central Banks were made independent
Rules for limiting budget deficits were defined3rd1st January 1999Euro was born
The European Central Bank took charge of European Monetary Institute and formed the Monetary policy for Euro1st January 2002Euro notes and coins were issued to all the member countries and later on their national currency was taken away.Criteria for EU Countries

The eligibility criteria for EU countries involve the following
Maintenance of Price This is done in relativity to the three members having the lowest inflation rates. The inflation rate for each member should not  go over the average rates of these countries by a percentage greater than 1.5

Inflation Control This is also done as per the criteria of Price maintenance but the relativity is checked for long-term interest rates. This variance should not be more than a percentage of 2 than the average rates of three members having the lowest inflation rates.

National Budget deficits this is checked in relative to the GDP where the value should not exceed 3percent of the economic GDP.

Public debt This is also checked in relative to the GDP where the value should be below 60 of the Economic GDP.

Maintenance of exchange rate There is a margin authorized for the exchange rates. The rates must be maintained according to that margin.

Euro Countries
The following are the countries that fit to the above criteria and have adopted the euro as their currency
YearMembers1999Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain2001Greece2007Slovenia2008Cyprus, Malta2009SlovakiaBudget

Deficit Maintenance
A main contributor to the Economic Stability, the Stability and Growth Pact, was formed in June 1997 and later on revised in March 2005. This was done in order to control budget deficits of the member countries according to the criteria defined and also impose penalties on those not fulfilling the requirements, thus maintaining budgetary disciplines among the members and controlling excessive deficits.

Formation of Euro Group
The Euro group is formed to conduct meeting of the finance ministers of the member countries of the Eurozone (Euro Economics). The meetings are done with the following aims
Economic Policies Coordination of all the member countries
Control over Budgetary and other Financial policies
Representation of Euro in other global forums

Optimal Currency Areas (OCA)
Optimal Currency area is categorized according to geographical boundary where the entire region within that boundary holds a single currency.  The region is formed by analyzing combination of currencies or formation of a single currency which would enhance economic efficiency. There are cases of OCA where the Optimal Currency area can be smaller or larger than a country. With a single currency, OCA therefore provides a fixed exchange rate between the participants belonging to that region. There are lot of cost and benefits attached to single currency among the members, but the benefits outweigh the costs.

Criteria for OCA
Symmetric Shocks
This is in relation to the supply and demand shocks that a country faces. To fit into OCA, the states should have symmetric shocks.

High mobility in terms of labor and capital movement
The OCS members should have a free flow of workers and capitals across the region.

Flexible Prices and wages
This is relative to the Economic shocks and fluctuations, where the prices and wages should be able to change quickly as fluctuations arise.

Funds transfer and adjustment of taxation
This enables the government to maintain a central authority to transfer funds and adjust taxes to benefit the countries from each other.

Analysis of OCA
Internal and external Balances
In case a region in OCA faces an asymmetric shock, the government has the power to maintain the internal and external balances through fiscal transfers. This is done by minimizing asymmetric shocks and transfer of funds from a more earning state for welfare of the less earning state. This is not the case with countries that are not in OCA.

Monetary and Fiscal Policy
In case of countries not in OCA, the asymmetric shocks in those countries do not stabilize the situation through a single monetary policy. This has to be done through fiscal policy to control the fluctuations and shocks in those countries.
U.S. and EMU analysis as per the OCA factors
Mobility in terms of labor and capital
The labor mobility of US is higher than that of EMU
The capital mobility of both is similar
Flexible Prices and Wages
US price flexibility is similar to EMU
US wage flexibility is higher than that of EMU
Funds transfer and adjustment of Taxation
US has higher fiscal transfers than EMU

Monetary Union- Pros and Cons Discussed
Monetary union has involved a lot of cost and benefit analysis over the past for the participating countries. The most important component of such a union is Trade (Schott 1991). There are a lot of factors to be considered in understanding the pros and cons of the Monetary Union, which are discussed in detail below

Benefits of the Monetary Union
The benefits of the Monetary Union are huge in the following aspects

Exchange Rate
The formation of a union gave rise to exchange rate stability, where the trade and finance becomes independent of price changes imposed by change in exchange rates. This involves reduction in all transactional costs between member cuntries. It also allows better flow of capital and other resources among the countries.

Single Currency Benefits
The following are the benefits that are obtained through a single currency among the members of the European Union

Rise in Intra-Monetary Union Trade - The use of single currency has led to a rise in trade between all the members of the monetary union. Considering the case of Euro-zone the trade has already rose by a percentage range of 5-10 (Europa).

Price Transparency - The common currency allows consumers and organization to easily compare their prices across the region. This again helps in competition and therefore price reduction. Also, exchange rate stability among the countries will not lead to fluctuation in prices of the goods across the region.

Transaction Costs - There are no involved transactional costs to convert currencies to conduct trade or buy products from countries within the region.

Benefits of Single Market
There a lot of benefits attached to the Single market which is one of the most important components of the Monetary Union. These include

Efficient Allocation of Factors of Production-There is a free flow of factors of production among the members of the monetary Union. This has increased efficiency of production for all such countries
Benefits to Efficient Firms  For efficient firms, the monetary union offers lower costs and increased profitability. This also results in increased competitiveness.

Benefits to Consumers- The increased competition leads to lower rates to consumers with more choices. Also, this has introduced newer product and market creations to overcome the cost of competition, thus additionally benefiting the needs of consumers.

Price Stability
The Central Bank of the Monetary Union might have an efficient Monetary Policy that encourages price stability, hence benefiting all the countries involved. This is the case of European Central bank that strictly imposes Price stability. This has benefited all countries whose monetary policy was not so found in terms of Price Stability.

Inflation
The inflation and Interest rates have been converged in the different countries through defined criteria like the case of EMU. The predefined elements avoid these to rise above a certain level, devising control among the monetary union.

Economic Unification
The Monetary union offers a single markets thus leading to Economic Integration and unification, refining trade among the member countries

Political integration and Stability
The Central bank has the authority to induce macroeconomic discipline on the countries that are part of the Monetary Union. This can lead to Political Integration and Stability within the countries involved.
Challenges and Costs of Monetary Unions

Apart from the benefits highlighted above, there are a lot of challenges and costs involved for the members of the Monetary Union. These are as follows

Tools of Macroeconomic adjustments
In case of monetary union like the EMU the countries tend to loose its tools of economic adjustments, these being the monetary policy and Exchange rates.

Control over Assets
The formation of a central bank incase of a Monetary union has imposed restrictions on control over assets

High unemployment rates
The introduction of monetary union has led to high unemployment rates among the member countries. This is also the case of EMU (Krugman 2010).

Monopolies
The introduction of increased competitiveness through monetary unions has made it difficult for monopolies to exist. Such organizations therefore cease to exist in countries who are member of the monetary union.

Budgetary Positions
The main challenge of a country is to not only maintain its budgetary position but gain an insight of the positions of other countries as well. This should be done as the impact of other countries could be huge incase of weaker positions.

Deficit Bias
This is the case when governments spending are more than that received. This leads to higher debts which is yet another challenge for the Monetary union, also prevailing in EMU (Mongelli 2010). There are restrictions for member countries and it is expected that over a period of time the receipts will be higher than spending hence generating revenues.

Personal Currency Representation
Incase of single currency, countries may face the requirement of their own currency representation in terms of their personalized preferences, but a single currency may not fulfill their requirement as there are a lot of countries sharing it.

Monetary Union Analysis
Time plays an important role in analyzing the costs and benefits attached to a monetary union. A few costs like that of moving towards the union and forming of a very strong body is incurred in the beginning of the union formation. The benefits attached are steady and are later on gained when the currency gains a wider acceptance throughout (Cihak Harjes  Stavrev 2009). So there is a time difference between what has been invested and what is being achieved.

Also, the costs and benefits vary among countries. All the countries which participate in a union are different with their different characteristics. There is a huge impact of ones budgetary and debt position on the other, where one might be strong and other might be weak. This might be taken as the benefit for one and the challenge for other member of the union.

The financial Crisis and the Eurozone
There are concerns over the sustainability of the Eurozone as the financial crisis has also impacted this region to a very high extent. The role of the heads of governments and the European Central bank is very important to address all such issues. The union comprises of strong and weak economies and criteria which should not be abandoned incase of crisis. Therefore, it is very important that regulatory authorities plan and implement the required factors to overcome the challenges that question the sustainability of the Eurozone as a whole and all its member states.

Recession hits the Eurozone
The recent financial crisis has posed many challenges on the sustainability of the Euro zone as the crisis that started from the U.S. soon affected the European banks resulting in failure. The recession hit the euro zone in 2008, which led to serious concerns for the member states to devise plans for economic stabilization. The plan helped to support co-ordination to avoid situations where one state would benefit at the expense of the other. The most important challenge was for the European Central bank to inject money into banks (Bryant 2009).

Sovereign Debt
One of the challenges of financial crisis for few of the members was that of sovereign debt. This is related to bonds in foreign currencies that are issued by the government. This crisis took place in 2010 between members of the Euro zone.

Crisis in Greece
The crisis in Greece led to a deficit that was above the criteria of the European Union. This created a new stand for the European Union to control the overall budget deficit (Pan 2009). The development of a centralized budgetary control can maintain the deficits from stronger economies to weaker ones. Another major point to ponder was that Greece might be a medium for the speculators to attack the Euro zone.

Conclusion
The Monetary Union has posed a lot of benefits to countries that operate under the same unified umbrella. It has been analyzed that the monetary union has to some extent similarity to the optimal Currency Area but there are certain criteria that differ each from one another. The US, has been observed to fall in an OCA with all the states sharing the dollar as a single currency with higher labor mobility and wage flexibility than the European Union.

The European Union has an aim to pursue stable exchange rates. The monetary policy of the union is controlled through the European Central bank whose main aim is to maintain price stability. This leads to stability among all member nations. The members have to fit into the criteria of Price Maintenance, Inflation control, Budget Deficits, public debts, and Maintenance of Exchange rates. Since the inception of euro in 1999, 16 countries have been using it till today.

Apart from a lot of benefits of unification, there are a lot of challenges attached to joining a Monetary Union. The individual countries loose their control over assets, policies and tools for macroeconomic adjustments as these are taken care by the Unions Central Bank. Also, all the countries impact each other in terms of public debt and budgetary positions, so an insight into all this is very important. If a country has a hold on all such factors to some extent then it can reap all the benefits attached to forming a single union.

Currently, the financial crisis has posed many concerns on the Euros sustainability. The countries involved have faced challenges individually as well, where leaving the eurozone is not an option. For countries where debt is high, their credibility can only be maintained through payments in the euro and no other form of currency (MacDonald 2008). The stronger economies have also played an important part in times of crisis where they have helped in lifting the ones with weaker economies. The role of European Central Bank cannot be ignored where the survival of the Euro and its progress is due to strong hold of the Banks and Governments efforts.

This essay presents an economic analysis of the new building, sale and purchase and freight sub-market of the Capesize dry bulk shipping market between the year 2005 and 2009. Emphasis will be placed on the economic structure of the Capesize market within the context of the underlying economic principles. These principles include demand and supply drivers, cost of new build and second hand vessels and freight rates. In the context of this essay, Capesize refers to large cargo ships that cannot traverse the Suez or Panama Canal and therefore use the Cape of Good Hope or Cape Horn.

Overview
The dry bulk shipping market has been rated as the principal source of goods transport in the world accounting for almost a third of all seaborne related trade. The Capesize market segment ranges between 100,000 and 200,000 dwt in size and is more popular and standard. The dry bulk shipping market is a volatile market that offers transport services for the movement of products such as iron ore, coal, bauxite, grains, phosphate rock and alumina among others.

The product offered by the dry bulk shipping industry is ton-miles whose price is the freight rate. The freight rate is determined by the supply of shipping tonnage and the derived demand for transportation of dry bulk commodities in a perfectly competitive market (Paul  Per 2009). The dry bulk market is however cyclical in nature and the freight rates have a tendency of being generally highly unpredictable. It is therefore imperative to understand that increased economic growth leads to increased demand of dry bulk which positively impacts the dry bulk market and vice-versa.

The Capesize dry bulk market has witnessed extreme volatility over the period between 2005 and 2009. It especially experienced strong levels of fluctuations near the end of 2008 and the beginning of 2009 which raised concerns over the likelihood of market recovery. Its problems were compounded by the global economic crisis which saw a significant drop in demand for transportation services while supply continued to grow steadily with more new build ships expected while the existing fleets lay idle. This has therefore resulted to a significant dampening of prices resulting from oversupply.

Additionally, there arose a distorting factor fuelled by the introduction of new market segments besides the standard ones for example the post-panamax and the very large bulk carriers that created the impression of increased supply which however was not the case.

On the demand side, slower growth was experienced in 2006. Drewry in 2006 predicted demand growth to rise by 5.4 in the five year period from 2005 to 2009. This was expected to maintain a supply-demand balance especially with the impression of increased supply from the additional segments.

Demand Drivers
Demand in the Capesize dry bulk market segment is driven by growth of trade. The strong industrial development of Asian countries especially China, India, and South East Asia has acted as a major driver of demand in the dry bulk market. It has led to a significant increase in demand for dry commodities as witnessed over the period between 2005 and 2007 where imports to China alone enjoyed a steady positive growth rate. The demand for dry bulk commodities grew rapidly surpassing the deliveries of new building.

There are a number of other fundamental demand drivers which include the continued increase in the world population and changes in eating habits which have seen more growth in demand for grain. There is also the aspect of wealth creation which has been on a steady increase across the world as well as rapid urbanization especially in the developing countries for example China and India. Finally, there is infrastructure growth which is a continuous process in developing countries and there is need for overhauling the old infrastructure of developed countries.

The financial crisis dealt a major blow to the dry bulk market and although it had been predicted, it hit earlier than expected. This presented a serious problem because fleet growth was still very high while demand on the other hand was expected to decline rapidly. This explains the weak nature of the dry bulk market throughout 2009. If the growth rate of tonnage supply exceeds the growth rate of demand, the easing of freight rates is inevitable.

The global economic turmoil caused a serious destruction in the demand of dry bulk which resulted in a significant decline in freight rates especially in the fourth quarter of 2008 which saw them reach record lows. The stimulus packages that have been employed by governments such as China so as to boost economic growth have aided in the slow recovery of the dry bulk market (Al Rajhi 2009).

The extensive proactive government policies that followed during the year are credited for the strong economic growth in various markets especially China. The analysis of fleet supply and the order book was usually inaccurate and incomplete as some elements such as cancellations and order deferrals were difficult to measure (Sabine, Shashi  Anna 2007). These factors have resulted in a recovery in freight rates and stabilization of costs of second hand vessels and later their increase is expected.

Supply Drivers
Supply in the dry bulk market is driven by orders of new ship building, the delivery schedule and the retirement or scrapping of existing old tonnage. Another factor that can affect supply is port congestion which causes delays and can affect the availability of the dry bulk fleet thereby affecting freight rates. Ship building in the year 2008 reached its fastest expansion period in response to increased demand for transportation services (Al Rajhi 2009). The year earlier had seen a modest growth in ship building which was in line with the growth rate of demand. Approaching the fourth quarter of 2008 however, the market was hit by the global economic turmoil which caused a significant decline in demand.

Problem is that it takes approximately 2 to 3 years for delivery of completed vessels after signing a contract and this means that there were a lot of orders of ship that were in the lime line of delivery which guaranteed continued supply growth rate (Al Rajhi 2009). This against a decline in demand was bound to push freight rates down inevitably. Most of the ships would be laying idle in docks due to decreased demand in transportation. It also saw multiple cancellations and deferrals of ship orders in a bid to capture the growth rate of supply.

Cost of New Build and Second Hand vessels
The activities of the order books of Capesize dry bulk vessels reached a record high in the year 2007 and 2008. This was fuelled by the increased demand for transportation which portrayed a steady growth rate up until 2008 with minor fluctuations (Al Rajhi 2009). So as to meet this increased demand, numerous orders were placed on Capesize vessels new buildings. There was also no scrapping of vessels in 2007 which led to an increase in the total fleet of Capesize vessels.

New build prices are a function of a number of factors which include the prevailing freight market condition, availability of delivery slots, competitive environment as well as future expectations of the freight market development among others. The argument for inclusion of future market developments as a factor of new build prices is because it usually takes 2 to 3 years after contract signing to deliver a new built vessel.

The dry bulk market had demand for transport reaching unprecedented levels in October 2007 with freight rates reaching as high as 200,000 a day. Ship owners were therefore compelled to search for new tonnage so as to meet the rising demand of Capesize dry bulk vessels. This prolonged boom also had a profound effect on costs of second hand vessels. According to Clarkson data (2010), there is a significant increase in the order book in million deadweight tonnes of Capesize fleets between 2007 and 2008 from 123.1 to 160.3.

The cost of new building had continued to go up which has been credited to the increased price of steel as well as the decline of the U.S dollar. With this increase in the cost of new buildings, ship owners had to rethink their acquisition plans and this consequently impacted the resale price of second hand vessels which is the next best viable option. Costs of second hand vessels therefore also went up significantly and plans of scrapping were deferred with owners opting to use vessels for longer (Sabine, Shashi  Anna 2007).

With the level of earnings very low in 2009 and with lack of support from other ship types the prices were bound to come down significantly. This decline in prices also affected the significant increase in international new shipbuilding from 2005 to 2007 as well as increase in ship equipment vendors. The cost of new ship building dropped significantly following the global economic crisis which led to decreased demand hence there was a situation of over supply and ship owners stopped placing more orders for new vessels which made the ship builders to lower the cost of new vessels.

The weak demand for new ships coupled with the increased new shipbuilding ability and reduced costs are bound to push the price of new build ships on a downward trend. The cost of second hand vessels was also affected and it decreased significantly. The cost of second hand vessels continued to weaken reaching a record low at the end of January 2009 (Pierre 2010). It was later that the market showed certain volatility as a result of fluctuations in freight rates but not again reaching the lows recorded at the start of the year.

Freight Rates
Freight rates are primarily a function of demand and supply in the market. This demand is affected by the global economic conditions while the supply is affected by the size and availability of the global Capesize dry bulk fleet. Fundamentally, a higher degree of demand over supply tends to push freight rates on an upward trend while oversupply pushes freight rates on a downward trend.

From Clarkson data (2010), freight rates slightly decreased between 2005 and 2006 but experienced a most notable increase in 2007. It then began a downward trend again reaching a record low in 2009. Between 2006 and 2008, the earnings of the dry bulk market increased tremendously with the Capesize prices increasing by approximately 60. The increase in prices was fuelled by the strong nature of the dry bulk shipping market that exhibited record high freight rates.

It is therefore clear that the increase in freight rates that occurred in 2007 coincide with the period that there was increased demand for transport services and this was also when many orders were made for new buildings and scrapping temporarily deferred. Delivery of new buildings could not match the rapid growth in demand and this therefore pushed the freight rates up.

The economic downturn as a result of the global crisis then brought about a decrease in demand which saw a very high degree of over supply that exert downward pressure on freight rates. This is the decline in freight rates that was experienced after 2008 which was as a result of the global financial meltdown which affected demand. There still were deliveries of new buildings and scrapping of older tonnage had not been keeping pace with the increasing supply. Due to increased costs of new buildings, most ship owners had opted to prolong use of older vessels hence the over supply.

Conclusion
In conclusion, the Capesize dry bulk market is finally out of the woods having recovered and freight rates and earnings getting back to healthy levels by mid 2009. This can primarily be attributed to Chinas economic growth which saw a significant increase in their imports. The demand for transportation services is also slowly recovering and the cost of new buildings and second hand vessels has slowly stabilized following the sharp decrease in 2008 (Ralph 2009).

On the supply side, the growth rate of the fleet size is decreasing aided by scrapping which had been temporarily halted. Scrapping is the measure through which supply is kept on check as the older tonnage is removed from the market to pave way for new vessels. This decreasing fleet growth coupled with the increasing sustainable demand is bound to evolve into a strong Capesize dry bulk market.

These developments are also bound to have a positive effect on the cost of new building as well as the cost of second hand vessels. This is made possible through scrapping as it removes old vessels and creates demand for new ships. The increased demand is also another factor as it creates the need for other ships and once the cost of new building stabilizes, the cost of second hand vessels is bound to follow (Ralph 2009).

Finally, freight rates which are dependent on demand and available supply are bound to remain stable especially with the decreasing supply of new vessels following the cancellations and deferrals of new ship building as well as the scrapping of a significant number of old vessels (Nicolas 2006). The gradual increase in demand means that eventually it will strike a balance with supply which positively impacts the freight rates.

In general real estate market is a multi million dollar business all round the world and in UAE in particular. This is mainly due to the importance given by the local governments in the process of boosting the tourism sector which is already on rise. Literature review and Theoretical considerations are helpful in understanding the different issues involved in the topic. This real estate market has faced several ups and downs, which is coupled with several factors. In order to overcome the problems faced by the real estate market in UAE in general and Abu Dhabi and Dubai in particular the is need for a concrete analysis of all the factors influencing the market and even need to utilize the recommendations provided by the prominent organizations and personalities.

Introduction
Current trend of real estate in Dubai and Abu Dhabi

Literature review
Recent trends in Real estate business
Factors affecting the Real estate market growth
Gross Domestic Product
Housing prices
CPI influence
Theoretical considerations
GDP (Gross Domestic Product)
Inflation
House prices
Elasticity in Real Estate Market
Population Effect on Real Estate in UAE
Consumer Price Index (CPI)
Correlation between factors and the real estate market
Future of Real Estate in UAE
Recommendations
Graphs and Analysis

Amending powers and Responsibilities of the Central Bank to make it Effective in Inflation Control

Abstract
Inflation is the increase in the general level of prices of goods and services in an economy over a certain period of time. This paper looks at the flaws that exist in the central bank which makes it ineffective in the control of inflation. Case examples of various central banks in various countries have been cited and ways suggested that the powers of the central bank could be amended so as to address these flaws.

There are various functions of the central bank which can range from implementing monetary policy, determining interest rates, controlling the nations entire money supply, governments banker and the bankers bank, managing the countrys foreign exchange and governments stock register, setting official interest rate and regulating and supervising the banking industry. The most important role of the Central Bank is to control inflation which maintains public expectations of a reliable and average pricing method. It accomplishes this task by primarily tightening money supply (Amadeo 2010).

Credit Control Function of the Central Bank
The Central bank has various tools which it can use in order to influence the level of money supply in the economy. Advameg Inc. (2010) lists them as reserve requirement ratio, the discount rate, and open market operations. Reserve requirement ratio is the legal ratio which is determined by the central bank, and which is required to be maintained by the depository banking institutions, in calculating the minimum reserves that they should keep. The discount rate refers to the rate at which the Central bank charges the depository banking institutions when it issues loans to them. The other popular tool is the open market operation which refers to the buying and selling of securities by the central bank so as to affect the level of money supply in the economy.

Despite the use of these tools, central banks have failed in their function of credit control. According to Bayne (2008) central banks were part of the problem of economic upheavals of the 1998 by allowing the credit crunch to break. This shows that there is a need to amend the powers of the central bank so that central banks can be consistent with their function of credit control.

Amending the powers of the Central Bank
In various countries the central bank has been charged with a lot of responsibilities to undertake. According to The Central Bank of Kenya (2008) the major responsibilities that the bank undertakes in the economy of Kenya, a developing country, are rarely below eight. The problem with these multiple objectives is that they could sometimes be in conflict or inconsistent with one another. In order for this bank and other central banks to carry out inflation control objectively, there is a need to amend their mandate to clearly state that the banks role is to achieve and maintain price stability.

The powers and responsibilities of the central bank can also be amended so as to make the central bank attain autonomy in decision making. This will mean that the central bank should have a certain independence which will assist it to be free from economic interference. Since its creation in 1935, the bank of Canada has struggled to keep free from undue political interference, while remaining receptive and responsive to government economic policy. The difficulty in reconciling these two, often opposing goals has left the Bank open to criticism and inadequate in its function of credit control (Parkinson, 2002).

The issue of political interference is centred around the powers conferred on the governor. In order to reduce this interference there is need for the powers of the central bank to be distributed across many individuals not centralizing it on the governor. In the case of Canada, the governor to the central bank is the CEO and Chairman of the Board of Directors. He is the final authority over a policy, and meets with Finance minister every week. To reduce the powers of the governor, the Act should be amended so as to allow the minister meet the whole council and policies developed made be subjected to an independent commission which will assist validate the policies (Parkinson, 2002).

In order for the central bank to control credit in the economy, all economic regions should be taken into considerations. The tools used by the central bank should be applicable with equal magnitude in all the regions of the economy. This is currently not the case since the operations of the central bank have been centralised in only specific regions. To consider the situation in Canada, it has been criticized for implementing monetary policies that are more responsive to the needs of Central Canada and to be precise Ontario, over other regions in the country (Parkinson, 2002).

Measures should also be developed to keep the directors of the central bank informed, on economic regions in their area through the creation of regional consultative panels. These panels representatives should meet with the council weekly, so as to submit reports on the economic welfare of their regions and thus able to develop measures to maintain a balanced and controlled credit in each region of the economy. Going back to Kenya, its central bank has only three branches in the whole country. As a developing country, more intervention in all the regions and provinces of the country should be required. Lack of a good national representation of all regions in making economic decision has contributed to increase the inflation rate to 26 (Central Bank of Kenya, 2008).

It is also an issue of concern to look at over independence of the central bank. Some countries have their central bank being too independent from the government. In the United States, the Fed is owned by few powerful families hence it is too independent of the government. It is argued that JF Kennedy was assassinated after he tried to interfere with their control of the monetary policy in the U.S.  The European Central Bank (ECB) has complete independence from government in exercising its mandate to manage the Euro, to keep down prices and to assure financial stability. This independence is jealously protected by the Euro zone central banks, which make up the council (Barney, 2008).

Amendments should be made so as to deal with the issue of over independence and dependence of the central bank on the government. A compromise should be arrived at of which Sri Lanka has tried to hit. The bank of Sri Lanka has been given a high degree of autonomy to achieve its objectives. The bank closely liaises with the ministry of finance in making policy decisions and the secretary of the ministry of finance is a member of the Monetary Board which is the governing board of the central Bank of Sri Lanka. This level of compromise provides a good check on the Central bank and also on the government, so as to have a central bank that is free from political interference and at the same time, taking into consideration the policies set by the government for the welfare of the economy (Central Bank of Sri Lanka, 2010).

The other area that requires the powers of the central bank to be reviewed is on appointments of the key personnel. The appointment of the council members should devolve even to other regions of the country. Provincial governments should be allowed to nominate candidates for the council and the federal government should consult with the provincial governments before making appointments for the Board of Directors positions.

Conclusion
In conclusion the powers vested on the central bank need to be amended so as to deal with pertinent issues that prevent the central bank from undertaking its function of credit control. Individual economies should look at their current situation, so as to set rules and confer powers on the relevant personnel so as to deal with flaws that exist in the central bank. It is only then that we shall experience a stable economy with stability on the price level.

This study will focus on Health Economics Analytical by comparing the National Health Service health care system of the United Kingdom and the private United States health care system. The study will focus on the mode of financing and the quality of both systems. The study will in addition evaluate the commonness of breast cancer in respect to United Kingdom. The study will conclude by giving a summary.

1.0 Introduction
Health issues are many and these concerns are generally mind bogglingly difficult. Discussions over trade-offs between social harmony versus personal independence, public versus private heath care financing, public versus private provision of heath care services, and the requirement for high-quality medical care verses more basic levels portray health care arguments in every nation. Private provision of health care and private sector financing joint with anticipation of Americans for their systems receptiveness is obviously hard to control. The U.S. health care system is extremely more costly than any other in the world and costs approximately twice as much as the U.K. system (Bolnick, 2002).

In comparison to the U.S., the U.K. National Health Insurance (NHI) system is a Federal tax financed health care system. All U.K. nationals have the privilege to get their health care without direct cost to them through medical practitioners that are salaried employees of the NHI and hospitals possessed and ran by the government. The federal government budgets the amount spent on health care (Mossialos and Thomson 2001). World Health Organizations measures illustrate that the U.K. health care structure has world-class health results with little difference across its citizens and high feedback for financial fairness. However, the system relatively low in responsiveness. Besides, the financially unconstraint U.S. system is more responsive to its population needs.

2.0 Health economics analytical
2.1 National Health Service versus U.S. Private System
According to Hubpages Inc. (2010) the National Health Service in the United Kingdom was set up in July 1948 to cover everybody in the country for health care. There has been complains about adverse standards of hygiene in hospitals, the high rate of hospital related infections, unreasoned decisions to ration specific drugs or treatments, overworked staff, the difficulty of getting a non urgent doctors appointment, the limited time one gets with the medical practitioner when the patient wants to see one, meals at hospital and so on (The Spectator, 2010). Getting an initial diagnosis from a general doctor is generally easy, but the patient might wait for weeks to get lab test results, even longer to get an attention of a specialized practitioner. These accrued problems have been brought by National Health Services (NHS). On the hand, the U.S. system faces few problems and the patients are charged once the patients have seen a medical practitioner (Lyons, 2009).

The U.S. health care system is private and Americans get health medication an insurance policy which is frequently paid by their employers. On the hand, the U.K. spent the equivalent of 8.2 of gross domestic product on healthcare of which 87.5 is state financed. 15.3 of GDP was spent on health care in USA of which 45.8 percent is state funded. The NHS is free since NHS spends 100 billions per year which is approximately 20 of UK government income. The U.K. system is free at the point of use since is financed from the taxation. The NHS is socialist in nature. This is because NHS is non profit system which embraces all and the patients need is paramount and is preferred over the U.S. most expensive system (Guardian News and Media Limited, 2010) as shown in table below.

Table 2.1 How NHS Compares
CountryPer capita on health ()Doctors per 10,000 populationNurses and midwives per 10,000 populationHospital beds per 10,000 populationLife expectancy at birthUnited States671926943178U.K.2815231283980Source Guardian News and Media Limited, 2000, p.1

The NHS allows out patients to pay only 7.20 for drugs issued by the general practitioner. The updated list of exceptions is as follows. 60 years old or more, 15 years old or less, under the age of 19 years and in full time education, expectant, or had delivered a baby in the previous 12 months, a person with continuing physical disability and people get free prescriptions when the persons are on benefits when jobless on a low income, or their spouse or partner is on such benefits. The NHS does not cover all dentistry for everybody except where one is 15 years old or less, under the age of 19 years and in full time education, expectant or had delivered a baby in the previous 12 months, gets benefits for unemployment or on low income, or their spouse or partner is on such benefits and in-patient in hospital including a dental hospital. Else everybody is entitled to register as a NHS patient with a NHS dentist (Hubpages Inc. 2010).

NHS patients who do not get free dentistry are charged in three categories. These are band1 who pays 16.50 which covers an examination, x-rays, scale and polish, fissure sealing, and fluoride vanish, band2 who pays 45.60 which covers band1 plus any filling, root canal treatment, or extractions and band3 who pays 198 which covers band2, plus crowns, bridges, and dentures. For eye care, patients get free eye tests when required if the patients meet the following conditions. If the patients are 60 years old or more, 15years old or less, under the age of 19years and in full time education, blind or partially sighted, have glaucoma or diabetes, or are at risk of these, or have close relative with glaucoma, gets benefits for joblessness or on low income, or their spouse or partner is on such benefits. Appointment and tests costs approximately 17. In the U.S. low income earner or those who are jobless do not easily access medication. This is because health care in the United States is very expensive (Hubpages Inc. 2010).

In 2007 GDP U.S. had 16 and U.K. had 8.4 total spending on health. U.S and U.K. had 7,290 and 2,992 spending per person respectively. Life expectancy was in the U.S. 80years (female), 75years (male) and 81 years (female), 76years (male) in the U.K. Infant mortality rate (per 100,000 live births), in the U.S. was 6.26 deaths and 4.85 in the U.K. Money spend on healthcare coming from public funds was 45 in the U.S. and 82 in the U.K. Further more, minor changes in the health system in the U.S. were 38 while in the U.K. was 20. Fundamental changes needed in the health system in U.S. were 48 while in the U.K. were 46. 36 of the population in U.S. does not visit a doctor when ill while in the U.K. is only 4 (Jelsoft Enterprise Ltd, 2010).

According to Schoen et al. (2009) survey, over 58 of the U.S. physicians said that patients frequently have difficulty for healthcare and half of U.S. doctors spend a lot of time dealing with the limitations insurance companies put on patients. 29percent of the U.S. physicians said that their practice had provisions for getting patients after-hours care and avoided visiting a hospital emergency room as compared to Dutch, New Zealand, and U.K. medical practitioners who declared that their practices had arrangements for after-hours care. Only 46 of U.S. medical doctors use electronic medical records, compared to over 90 of doctors in U.K. Rarely are physicians given financial incentives to improve the quality of healthcare in the U.S. as compared to doctors in the U.K. (89). Patients with persistent illness need extensive time with medical practitioners, teaching about their sickness, and coaching about treatment, diet, and medication routine. Care teams composed of clinicians and nurses have been revealed to be efficient in providing care to patients with chronic conditions and in improving outcomes. The availability of such teams is prevalent in the U.K. (98), and in other as show in the figure 2.1 shown below.
Figure 2.1 Practice Has Arranged for Patients After-Hours Care to See DoctorNurse

Source Scheon et al. 2009. p. 1
2.2 Commonness of Breast Cancer
 The vulnerability of breast cancer is as follows. Breast cancer is likely to emerge two times to women with a mother, sister or daughter detected with breast cancer. Though the threat rises with the number of first-degree relatives diagnosed with breast cancer, but eight out of nine breast cancers transpire in women without a family history of breast cancer (de Silva, 1996). Obesity raises the threat of postmenopausal breast cancer by up to 30percent. Women using hormone replacement therapy (HRT) have a 66percent increased danger of breast cancer. Further more, the danger of breast cancer increased by approximately a quarter in users of oral contraceptives. Drinking modest amounts of alcohol raises the risk of breast cancer by 12 percent.

In the U.K., the breast cancer screening programme operated by the NHS was pioneered in 1988 in rejoinder to proposals made by a working group chaired by Professor Sir Patrick Forrest. Currently the programme has an annual budget of 75 million and screens approximately 1.5million women per year in about 100 breast cancer screening units instituted across the U.K. Approximately 119,000 cancers have been diagnosed in women since the introduction of screening and 1400 lives saved per year in England alone. The 95 confidence interval for the cost-effectiveness of extending screening to the 40 to 49 years age group was estimated as 9,000 to infinity was saved per life (Madan and Rawdin, 2008). For older women, systematic review has identified a range of estimates for the cost per life-year saved of extending screening to age 75years or 80years of US34,000 to US88,000 in 2002 (Mandelblatt, et al. 2003). Figure 2.2 below and Table 2.2 .

Figure 2.2 Identification of women at high risk of breast cancer through the National Health Service Breast Screening Programme (NHSBSP)
Source de Silva, 1996 p.3

Table 2.2 Costs involved in screening and subsequent diagnosis
Activity200506 Cost200607 cost (05064.6)Initial two-view mammography4042Further mammography6770Ultrasound examination7478Biopsy241253Source Madan and Rawdin, 2006 p. 13
Breast cancer is currently the most common cancer in the U.K. Over 45,000 women were diagnosed with breast cancer in 2006. Yearly about 300 men are diagnosed with breast cancer. Incidence rates of breast cancer have risen by more than 50percent over the last 25years. Female breast cancer occurrence rates in the U.K. have risen by 6percent in the last 10years. 8 out of 10 breast cancers are detected in women aged 50 and over. The NHS breast cancer screening programme detects about 10,000 cases of breast cancer yearly in England. Breast cancer screening programme by the NHS saves approximately 1,400 lives yearly in England (Madan and Rawdin, 2008). Over a million women are diagnosed with breast cancer yearly worldwide. Northern and Western Europe and North America have the highest rates of breast cancer and lowest rates are reported in Northern, Eastern and Middle African countries and Asia (Cancer Research UK, 2010).

Currently more women are surviving from breast cancer than previously. Approximately 2 out of 3 women having breast cancer currently survive and live beyond 20 years. For 40years breast cancer survival rates have been improving. 5 out of 10 breast cancer patients survived the disease beyond 5years in 1970s. Now 8 out of 10 patients survive. Women from most affluent areas have higher rate of survival from breast cancer than those living in most deprived areas. The earlier the breast cancer is diagnosed, the higher the rate of survival. Women diagnosed with stage 1 breast cancer about 9 out of 10 survive the disease beyond five years. Those diagnosed with stage IV breast cancer, only 1 out of 10 survive (Cancer Research UK, 2010). Table 2.3 below.
Table 2.3 Breast Cancer in U.K.

Source Cancer Research UK, 2010 p.1
Currently beast cancer is the second most cause of death in women after lung cancer. Approximately 12,000 women and about 70 men die from breast cancer every year in the U.K. About 1,300 deaths are reported every year from breast cancer in women below 50 years. Over a half of breast cancer deaths are women aged beyond 70 years. The peak of breast cancer death rates was in late 1980s and now has fallen by about a fifth (Cancer Research UK, 2010). Figure 2.3 below.

Figure 2.3 Breast cancer death rates, females, UK, 1971-2007

Source Cancer Research UK, 2010 p.2

Conclusion
The National Health Service health care practiced in the United Kingdom is far much better than the United Stated states health care system. Though the National Health Service is faced with quality issues due medical practitioners being enticed with financial benefits to work, long wait lists, difficulty in accessing a specialist and long waits for lab result, but the health care system is cost effective. This is because the health care is financed by the government as compared to the United States health care system which is purely private and only persons with insurance cover can afford to access the health care rendering those who are jobless and vulnerable groups without an alternative. The screening Programme initiated by the National Health Service has cut on cost of diagnosis through screening and treatment of cancer. There is room for improvement in both National Health Service health care system in the U.K. and that of the U.S.

Classical theory revolved on markets, and it is regarded as among the first economic though of modern school theories. It postulated that markets were to operate freely to ensure that the economies prosper. Some of the renowned developers of this theory include David Ricardo, Adam Smith, and Thomas Malthus, who were able to formulate numerous laws that tended to ensure economies operated efficiently. Most of the laws that are championed by classical economical theory are based on the theme of economy tendency towards a state that is stationary, and ensuring economic growth is sustained. Laws that are common and utilized by classical economic theory includes (Rima, p. 186)
Law of value (Rima, p. 186)  is based on the Adam Smith problem that those commodities frequently available has greatest value in use usually has relatively little value in exchange while products that are infrequently utilized have a higher value in exchange e.g. diamond. Moreover, value theory is associated with supply and demand philosophy, and tends to shape the outcome of value in exchange (Rima, p. 187).

Law of wages  the wages received by laborers is used on the wage fund. The number of laborers dictates wages while just a few receive better wages at the expense of others (Rima, p. 187). Such an approach was biased since wages only favored some specific personnel. 

Law of capital accumulation brings into consideration savings propensities of capitalists (Rima, p. 190). Workers do not have enough to accumulate while capitalist, because of capitalist mode of operation, champions the accumulation function. They utilize these extra earnings to accumulate more through introduction of means that improves on productivity.

Law of population growth  population growth is based and controlled by the availability of subsistence (Kurz  Slavadori 67).

Law of diminishing returns the value of production or project decreases in terms of effectiveness after achieving or arriving at certain level in its tendency (Mankiw 60). This means that after utilizing a give resource for some time, its effectiveness starts to diminish and its benefits becomes obsolete. 

Law of rent  this law states that the rent of a piece of land in a specific place is equal to economic advantage through maximization on the site, against the advantage of utilizing marginal land for similar purposes while capital and inputs of labor are held constant. This means a landowner is not capable of setting land rents but he can only appropriate additional production to the advantage of the site relative to another individual basing his or her operation on marginal sites (Mankiw 56).

Law of comparative advantage  it brings into consideration international trade. The classical writers state that importing a product stabilizes prices or prevents the price from rising ensuring that both ends benefits e.g. seller and purchaser. Thus, comparative costs compare the price of international product to the cost currently at the market. Charles Babbage (Rima, p. 192) supports this view because a country can obtain competitive advantage though division of labor. He states some countries produce and export machines while they import products that are cheaper in value relative to machinery that have higher exchange value.

Law of quantity theory of money  it is based on the understanding that money prices reflects on real factors (Rima, p. 193). This means that price level s affected by money in that money prices is directly proportional to quantity of money in a country. Thus, the amount of money circulating should be equated to a standard, in that one is used to replace another. This means the price a product should be proportional to production cost.

Law of markets  also known as Says Law is based on the understanding that supply creates demand. It means that the laborers or wage earners utilize their earnings for basic requirements while capitalist utilize their earnings to improve on productivity.

The long-term goals of classical economics are two fold in that it simplifies the model of operation that reflects on the actual economic system. Secondly, it fundamentals logic provides a base in which policy of economy liberalism can be encouraged while the economy could be free fro governmental regulations (Rima, 197). Thus, it enables a system that self corrects itself, a system that is capable automatically to adjust to external factors that impact on the equilibrium. Moreover, classical economic encouraged development and shaped political theory in its operational capabilities. All these developments were aimed at ensuring businesses and economies maximizes on profit generation (Kurz  Slavadori 67).

Generally, classical economy theory was aimed at ensuring a framework is formulated to provide means in sustaining economy. This resulted in creation of laws that occurred from the nature business environment and economic position. These laws provide a better understanding of environment and means of relating functions to businesses.

Minimum wage laws represent the crucial role assumed by governments in regulating the level of labor force wages however in the recent years these laws have raised controversial debates regarding their benefits and shortcomings.  Supporters of the minimum wage argue that it improves the living standards hence reducing poverty level.  On the other hand opponents argue that it increases the rate of unemployment especially among inexperienced employees thereby hurting less skilled workers at the expense of more skilled workers (Black, Hashimzade  Myles, 2009). 

Despite the minimum wage having objectives which are globally accepted, a major disagreement is gaining momentum on whether it is effective in achieving its objectives.  In spite of the enormous experience and knowledge gained from decades of economic studies conducted, arguments regarding the pros and cons of minimum wage are still apparent today.  These laws are still highly controversial, and as a result, have gained more support from the general public than from economists (Neumark  Wascher, 2006). 

Moreover, minimum wage laws are not universal but vary from one nation to another.  In New Zealand, the minimum pay is categorized into three rates which play an important role in setting the wages of employees.  These include the adult minimum wage, new entrant minimum wage and training minimum wage.   The adult minimum wage which has been currently raised to 12.75 per hour is applicable to employees who are not trainees or new entrants and in addition to that must be 16 years old and above.  The rate for the new entrant minimum wage which is 10.20 affects employees aged 16 to 17 years old, excluding those with three months or 200 hours of employment, supervisors, trainers and trainees.  While the training minimum wage which currently stands at 10.20 affects employees undergoing industrial training which involves a minimum of 60 credits per year (Department of Labour, 2010).

The wage structure requires a political redefinition in order to achieve the most appropriate income distribution which is socially acceptable.  The minimum wage comprises of a strong social appeal based on the market capability to cater for the needs of members of the less skilled workforce through provision of income equity (Eatwell, Milgate  Newman, 1987).  Redefinition is important as minimum wage laws are normally judged against their touchstone of poverty reduction.  This paper explores the consequences of the minimum wage in the society and economy of New Zealand, and also analyzes the effects of increasing it.  The essay is divided into two parts positive consequences and negative consequences. 

Positive consequences
In societies, the lowest social class is characterized by high poverty level and lack of education hence constitute the less skilled employees in the job market.  Minimum wage ensures equity in the distribution of income thereby improving the living standards of the poorest and most vulnerable class in society by raising them to an average level (Filion, 2009).  Without minimum wage laws, such employees will be susceptible to discrimination as will receive wages inadequate to sustain themselves thereby resulting to their languishing in poverty despite being employed. 

Pacheco (2007) has covered several impacts of a high minimum wage in New Zealand.  Among the findings is that a higher minimum wage can affect wage inequality particularly among the youth.  The study revealed that by raising the real minimum wage by a large margin, the level of wage dispersion among teenagers is affected negatively.  This supplements the notion that increasing the minimum wage, income inequality is eliminated, the study results proved the same as from 2000 onwards the level of wage dispersion among the teenagers and young adults were noted to be decreasing steadily as the minimum wage rose. 

Since 2001, the government of New Zealand has been increasing the minimum wage steadily each year and as a result, the country has a higher minimum wage with regards to that of the United States (Pacheco, 2007).  Despite economists arguing that the increase has negative consequences on employment rate, it plays a crucial role in motivating and encouraging employees to put additional efforts in their duties as well as increase their working hours (Hyslop  Stillman, 2004).  An increase in wages or salary acts as a motivator to employees since it shows that their efforts are appreciated and adequately rewarded.  In addition to that, it increases their work ethics as employers will be expecting more from them due to the high labor cost (Filion, 2009).  Normally, low income earners have low work ethics due to their low wages and employers do not demand much from them however by raising their wages they become more responsible and disciplined as employers expect more.

An increase in working hours was realized among youth employees in New Zealand following an increase in the minimum wage (Hyslop  Stillman, 2004).  This provides an implication that employees were motivated to work longer hours in order to earn more.  A low minimum wage demoralizes employees and in addition to that employers never care much about their performance thereby resulting to their low productivity.   On the other hand, a high minimum wage provides insight to employees on the importance of a high income and in addition makes employers aware of the importance of employees performance level.  This therefore resulted in employees particularly the young adults, working additional hours and putting more effort in order to improve their performance and productivity.

According to a research by Filion (2009), an increase in the minimum wage affects the economy positively.  By increasing the minimum wage more money is placed in the hands of the low-income earners thereby stimulating consumption as they spend their entire paychecks.  By having more money at hand, expenses also increase and this in turn results in more cash flow and economic growth is realized with time.  In New Zealand, young adults and teenagers are expected to gain more as a result of the increase in minimum wage since they will be taking home more money thus meeting their increasing needs. 

 High poverty level implies more government spending through social welfare programs.  By increasing the minimum wage, incomes of the lowest paid employees also increase thereby resulting in poverty reduction and in turn the cost of social welfare programs funded by the government decreases (Filion, 2009).  This can be attributed to more families and individuals being able to meet their basic needs hence not requiring much support from the government.

Negative consequences
A research by Abbott (2000) revealed that minimum wage laws resulted in exclusion of low-cost competitors from the labor market, emergence of numerous industrial-economic inefficiencies, unemployment and in addition to that, impeded industries from reducing their cost of wages during times of economic and trade downturns.  During the trade decline period, the profit incurred by industries decreases forcing industries to adopt appropriate strategies which would result in their augmentation.  Such strategies entail cutting expenditures and this can be achieved through reduction of their employees wages or the number of employees.  However, since minimum wage laws forbid organizations from reducing wages of their employees beyond the set limit, many will opt to reduce the number of employees thereby resulting in an increase in unemployment rate and poverty.   

An increase in the minimum wage from time to time can affect adversely the rate of employment of teenagers and young adults.  A study conducted by Maloney (1997) in New Zealand concluded that an increase in the minimum wage has a significant negative effect on employment rate of young workers.  This can be attributed to organizations becoming more wary when hiring less skilled employees.    A research by Chapple (1997) using time series and data panel sets analysis also replicates these results despite the negative effect on employment rate being minimal.  A high minimum wage implies that organizations will be spending more on their workforce and in order to maintain their profit margins better strategies need to be adopted.  Such strategies may involve hiring programs within organizations being halted thereby resulting in few employees being able to secure employment.

Moreover, a more recent study by Pacheco (2007) concluded that high minimum wage can affect employment propensity.  During the study individuals were isolated in order to provide an adequate distinction of the impact of the minimum wage on different groups.  The results revealed that negative employment effects for most groups were concentrated within the class of 16 to 29 years old.  Moreover, the sub-groups which stood-out as most adversely affected by the high minimum wage were 16 to 17 year olds and the Maoris, which is an ethnic minority group.  This provides an implication that the effects of an increase in the minimum wage in New Zealand are felt strongly by the minority ethnic groups, teenagers and young adults. 
 
Minimum wage laws benefits the skilled and productive employees at the expense of the unskilled and least productive ones (Black, Hashimzade  Myles, 2009).  This results in segregation of certain groups of employees from the labor force which are usually characterized by lack of experience and skills, and include teenagers, young adults, minority ethnic groups, migrants and many others.  Organizations may prefer hiring skilled individuals whose experience will result in high productivity being realized and not the less skilled one whose productivity is low.  However, in a study conducted in New Zealand, Chapple (1997) noted that there was no tendency of small industries firing the less skilled employees as the minimum wage increased.  In spite of that, the rate of hiring less skilled employees was expected to decrease as the minimum wage grew.   Furthermore, with higher minimum wage, industries are expected to cut costs hence will spend less on employee training.  As a result, hiring skilled employees becomes the best option since they do not require much training thereby resulting in the less skilled employees being left out. 

Consequently, the effects of the high minimum wage are spreading to the educational sector and influencing the rate of enrolment.  In their study, Pacheco and Cruickshank (2007) noted that for 16-19 year olds the increase in minimum wage had a significant negative effect on their enrolment levels in learning institutions.  Many teenagers and young adults are opting to enter the labor market rather than pursuing higher education.  This result also provides assistance in explaining the relationship between higher minimum wage levels and augmented rates of labor force participation.  Education is essential in ensuring individuals have a bright future, however the high minimum wage is enticing teenagers and young adults to participate in the labor force hence exposing their future to risks. Moreover, it is imperative for individuals to pursue higher education at a tender age to avoid the difficulties experienced when the brain and body start to wear out at old age.   

Conclusion
Minimum wage laws play an important role in the New Zealand society and the countrys economy.   By increasing the minimum wage, the society realizes numerous benefits associated with it.  These include improved living standards, reduction in wage dispersion leading to wage equality, performance improvement as employees become motivated to work for longer hours and in addition, the government saves many resources which would have been used in social welfare programs.  High minimum wage has also been noted to have a positive effect on the economy of New Zealand as low-income earners have more money at their disposal hence are provided with the capability to spend more.

On the other hand, the shortcomings of a high minimum wage are apparent and their effects are influencing the society adversely.  Studies conducted reveal that high minimum wages result in increments in unemployment rates and segregation of teenagers, young adults, migrants and minority ethnic groups from the labor market.  Moreover, it forces employers to adopt strategies which harm the less skilled employees while benefiting the highly skilled ones.  In addition to that, it affects adversely enrolment levels in learning institutions as teenagers and young adults choose money over education. 

It is therefore apparent that a high minimum wage brings benefits and limitations to the society.  This makes it imperative to redefine minimum wage laws and the wage structure in a way that benefits of the minimum wage are increased while limitations are eliminated.  Conversely, as a result of some studies having contradicting results regarding the consequences of increasing the minimum wage, more research should be conducted in New Zealand to ensure the controversial debate is settled.