Question

Finance Minister Eric Girard announced that the province will give up to $100 extra weekly to cashiers, grocery stockers, delivery people, and everyone who keeps the province running.

Girard said that the program is meant to ensure that those essential workers will earn more by working than by applying for the federal government's emergency benefits program (CERB), which provides Canadians struggling financially with $2,000 a month.

Using the logic of supply and demand, explain what is happening in the low-wage labour market that characterizes many of these essential services. Make sure your answer addresses the following question:

1. Explain what this policy does for the distribution of income, particularly on the wages of essential workers in low skilled sectors of the economy. How does this policy affect the incentives of employers and what might be the long-run implications of this policy?

Answer 1

As the question state, people in the lower wage labour market or the essential workers will be given $100 extra per week and the objective here is so that they earn more then what they would have if they applied to the emergency fund where people struggling financially are given $2000/- per month.

Logically speaking humans need incentives to work the extra bit or to work under critical situations. If the government gave aid to people in general, no one will have the incentive to go out and work, this could hamper the functioning of the province.

The demand currently is high as people are in the fire of resources running out and will often over buy resources. This requires supermarkets and general stores to run. When the government gives the incentives of $100 on the usual income, people will be motivated to come to work rather then applying for the emergency funds. An eg suppose a cashier earns $ 11 an hour and works for 40 hours a week. This gives him an income of $440 per week. This makes its $1760 for the month. This would be less then the $2000 per month. The additional $400 for 4 weeks adds the total to $2160. The extra $160 is the incentive for people to work and keep the essential services running.

Such a policy will with time attract more people into these segments and the supply of labour will out grow its demand. The said policy of extra $100 will increase the weekly wages of this segment and more and more people will wat to earn the extra $160.

In the long run when the economy opens up completely the demand for these services will reduce and the supply of labour will still be high. When the emergency relief will end, people will have to go back to working the usual hours and the essential services would probably still earn the extra amount. this may cause a shortage of labour in the other segments where such an incentive is unavailable. Thus, with time this policy needs to change, otherwise it will cause a shift in the supply of labour to the essential services.    

As the question state, people in the lower wage labour market or the essential workers will be given $100 extra per week and the objective here is so that they earn more then what they would have if they applied to the emergency fund where people struggling financially are given $2000/- per month.

Logically speaking humans need incentives to work the extra bit or to work under critical situations. If the government gave aid to people in general, no one will have the incentive to go out and work, this could hamper the functioning of the province.

The demand currently is high as people are in the fire of resources running out and will often over buy resources. This requires supermarkets and general stores to run. When the government gives the incentives of $100 on the usual income, people will be motivated to come to work rather then applying for the emergency funds. An eg suppose a cashier earns $ 11 an hour and works for 40 hours a week. This gives him an income of $440 per week. This makes its $1760 for the month. This would be less then the $2000 per month. The additional $400 for 4 weeks adds the total to $2160. The extra $160 is the incentive for people to work and keep the essential services running.

Such a policy will with time attract more people into these segments and the supply of labour will out grow its demand. The said policy of extra $100 will increase the weekly wages of this segment and more and more people will wat to earn the extra $160.

In the long run when the economy opens up completely the demand for these services will reduce and the supply of labour will still be high. When the emergency relief will end, people will have to go back to working the usual hours and the essential services would probably still earn the extra amount. this may cause a shortage of labour in the other segments where such an incentive is unavailable. Thus, with time this policy needs to change, otherwise it will cause a shift in the supply of labour to the essential services.