Question

In: Economics

Provide a discussion of how you think the minimum wage law benefits or does not benefit...

Provide a discussion of how you think the minimum wage law benefits or does not benefit the lowest skilled workers in America.

Solutions

Expert Solution

Since the price floor is the legal minimum price which can be charged and it is set above the equilibrium price. It leads surplus of workers.

So when the minimum wage law is enforced, the wage rate for all employed workers increase.

Since the wage rate has increased, so the employer like to hire less wokers because it is costly to hire workers. So employer will try to hire as less worker as possible. . Therefore employer will keep only skilled workers and lay off low skilled workers and therefore total labor demand decrease.

It means more unemployment will be there compare to before the minimum wage law.

This is the disadvantage of the minimum wage law.

On the other hand, due to hire wage rate, the people who were not willing to work, now they start searching job. Hence the supply of labor will increase.

So this leads to surplus of labor in the market.

The workers who are able to keep their job safe, they will be better off because now they are getting more wage compare to before the minimum wage law.


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