Question

In: Economics

there is a fear that adjusting minimum wages upwards will lead to a general decline in...

there is a fear that adjusting minimum wages upwards will lead to a general decline in the level of training firms offer their employees. is there any legitimate cause of worry?

Solutions

Expert Solution


The increase in minimum wage tends to decrease the training provided by the firms. The increase in minimum wage will compel more workers to find a job, and hence there will be an increase in the level of competition. Increased competition will also force the firms to pay higher wages, that will thus increase the cost of training. The increased cost of training will compel the firms to reduce the level of training provided to the employees.
The reduced level of training will definitely create a legitimate cause of worry. The reduction in the level of training will lead to less skill development among the employees. The reduced level of skill development will also reduce the productivity of the employees. Hence, the production process of the firms will get negatively affected. With a reduced level of training, the employees will not be able to work efficiently and thus will lead to their termination.


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