Improvements in computer technology tend to increase the wage gap between high-s
ID: 1237190 • Letter: I
Question
Improvements in computer technology tend to increase the wage gap between high-skilled workers and low-skilled workers. Some policymakers want to increase the minimum wage in order to reduce the gap between high- and low-paid workers.
According to the author, raising the minimum wage might create some unemployment at the entry level to the labor force. The minimum wage is a classic example of a price floor. You may have already covered the effects of price floors. Take a moment to review the possible consequences of a wage floor in the problems below. Suppose the graph in the calculator below represents the market for low-skilled labor in Florida. Use the calculator to solve the problems below.
A) $7.50; 400,000
B) $6.00; 500,000
C) $9.00; 600,000
D) $7.00; 300,000
Explanation / Answer
Improvements in computer technology tend to increase the wage gap between high-skilled workers and low-skilled workers. Some policymakers want to increase the minimum wage in order to reduce the gap between high- and low-paid workers. According to the author, raising the minimum wage might create some unemployment at the entry level to the labor force. The minimum wage is a classic example of a price floor. You may have already covered the effects of price floors. Take a moment to review the possible consequences of a wage floor in the problems below. Suppose the graph in the calculator below represents the market for low-skilled labor in Florida. The equilibrium is the point of intersection i.e. $7.50; 400,000