Minimum wage is a price floor, so discuss an increase in the minimum wage from a
ID: 1202156 • Letter: M
Question
Minimum wage is a price floor, so discuss an increase in the minimum wage from a supply and demand standpoint, making sure to address the concept of surplus with respect to the quantity of labor supplied and the quantity of labor demanded that is generated by this price floor
What might be the impact on government spending on entitlements such as welfare, food stamps, and unemployment compensation in light of the fact that changes in the minimum wage can create changes in unemployment and underemployment?
Based on your responses, do you believe that the minimum wage should be raised, lowered, remain as it currently is, or be altogether eliminated? Explain your answer, and make sure to address any social responsibility the government should have regarding the well-being of its citizens with respect to the setting of wages in the private sector.
Discuss any potential changes in the incentives for low-skilled workers to increase their human capital, and for employers to substitute capital inputs (technology and automation) for labor
What will be the impact on the prices of the products produced by workers working at or near the minimum wage level, and how will this affect overall consumer purchasing?
Explanation / Answer
If minimum wage is increased its more likely that firms won’t hire new people than that they will fire current employees. For example, movie theaters have stopped employing ushers almost entirely. And many companies are moving toward more automation, at least partly because of minimum wage increases.When minimum wages are increased & low-wage employers don’t have staff/labour to trim.Then existing, workers are laboring at higher capacities than ever & businesses employing low-wage workers offset wage increases in other ways such as will increase costs & it will also create inflation. When wages are higher, employees stay longer in their jobs, and that saves employers the expense of hiring and training new workers.
Goverment spending is reduced when minimum wages are increased de to the below reasons
(i) providing a fair wage standard for low-skilled workers
(ii) aiding middle class as well as near-poor families
(iii) spurring economic growth by redistributing income to those with a higher marginal propensity to consume
(iv) reducing lowskilled individuals’ dependence on government
If the economy is already in inflation and minimum wages are increased it will create more enemployemnt & more inflation. Goverment need to egulate inflation and keep a check over it. Becasue if inflation increases real wages gets reduced.
If continously labour input wages increases then firms may think to substitue it wilh capital to control cost and rising prices of output. This will create further unemplyment & low skilled labour, semi skilled labour will be deeply hamper. Over all consumption of product produced will also decline & if due to continue increase in product price & inflation, consumption will be greatly reduced.