Question

8. Write a critical summary of this NY Times article “Higher Minimum Wage May Have Losers”

Answer 1

Rising minimum wage shifts the employer surplus to the worker surplus by increasing employment rates as wages rise under monopsonic conditions on the labor market. When equilibrium salaries are achieved, further increases in the minimum wage would pressure employers in the short run and result in losses for the least productive low wage workers. In the medium to longer term, the least productive / least desirable workers are still the ones who suffer the negative consequences when companies adjust and consumer prices increase.

When you begin to see negative effects on wages, it should be a red flag that the minimum wage increases above the equilibrium in the economy. Whether this is a good thing or a bad thing depends on the goal of raising minimum wage. Perhaps you think that low-productivity / less "wanted" employees shouldn't be employed at all and pay more to the more productive / wanted workers than they are currently being paid. If this is the case then you should accept an increase in the minimum wage above the equilibrium of the economy. If those are your expected targets, $15/hr would be a good start, nationally.