Is the minimum wage a living wage? Under what
circumstances would a minimum wage be a nonbinding price floor?
Under what circumstances would a living wage be a binding price
floor? Should the government enforce a minimum wage? Should the
government implement a living wage?
Understanding Minimum Wage Policy
Minimum wage is one of the most classic price floor policies
that governments use in practice. Suppose the following demand and
supply curves describe the labor market for bus drivers in
Endor.
Demand: P = 20 – 0.75Q
Supply: P = 2 + 0.25Q
where P is the wage per hour, and Q represents
the number of bus drivers hired, in thousands
(e.g. Q = 1 means that 1,000 drivers have been hired).
a) Calculate the...
Suppose there is a discussion about the minimum wage policy. A
group of people argue that the wages are currently too low for
unskilled labor. They advise government to increase the minimum
wage: (5 points)
a. What would this probably mean for the labor market for the
college-educated skilled workers? Will that market be affected?
Will the equilibrium wage change for the skilled workers? Show
using our regular tools of supply and demand. (5 points)
b. What about unskilled labor?...
Suppose there is a discussion about the minimum wage policy. A
group of people argue that the wages are currently too low for
unskilled labor. They advise government to increase the minimum
wage:
a. What would this probably mean for the labor market for the
college-educated skilled workers? Will that market be affected?
Will the equilibrium wage change for the skilled workers?
b. What about unskilled labor? How are they going to be affected if
a new minimum wage law...
Wage rate (dollars per hour) Labor supplied (millions of workers) Labor demanded (millions of workers)
11 7 1 10 6 2 9 5 3 8 4 4 7 3 5
What is the equilibrium wage rate in an unregulated market (no minimum wage)?
A researcher is evaluating whether an increase in the minimum
hourly wage had an effect on employment in manufacturing industry
in the following three months. Taking a sample of 25 firms, 1. [3
points] what should she conclude if the mean decrease in employment
is 9 percent and the standard error of the mean is 5 percent (use
5% significance level)? 2. [3 points] what should she conclude if
the mean decrease in employment is 12 percent and the standard...