Can minimum Wage policy Cause unemployment or job losses?

Expert Solution

ANS.

Minimum wage policy focus on increasing the minimum wages being provided to employees. If the wages will be raised, someone has to be pay out more money. But employers also need to maintain a profit margin to stay in business. so employers tend to compensate by cutting jobs — usually entry-level positions.

The cutting of entry-level jobs is crucial for employees who are not able to increase their skills and knowledge for higher level of jobs and these jobs are their only employment opportunity and way of earning money. To ensure that these jobs are not cut, this subgroup would be better assisted by an expansion of the Earned Income Tax Credit, which provides tax breaks to low-income earners and their families, granting them the equivalent of a wage increase.

EXAMPLES

1. research from Cornell University shows that African-American teens and high school dropouts experience about four times the job loss following a minimum wage increase.

Rahul Sunny answered 2 years ago

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