Question

In 2-3 paragraphs, respond to the following - Do you think that minimum wage laws affect overall poverty? Explain.

Answer 1

Ans) Minimum wage is an example of price flooring, where the wages are set above equilibrium price.

Government sets a minimum wage to protect the interests of workers. It helps the workers to secure a better pay, which raises their standard of living and pulls them out from poverty.

But it can also lead to some undesired consequences. Employers might, now, employ less workers, which mean that the unemployment rate will increase i.e increased poverty. Employers will also prefer employing more skilled workers over less skilled workers. It can also prove disadvantageous for college students who need job for experience and employers are not ready to employ them at these high wages.

But it does not mean that overall impact of minimum wage is negative. Minimum wages is no doubt, necessary for workers, so that they can get fair wages. The resultant of minimum wage depends upon how high the minimum wage is set. A right amount of minimum wage will prove to be overall beneficial for the workers, pulling them out of poverty and raising their standard of living.