Question

Be original and use your own words

What are some arguments in favor of raising the minimum wage? On the other hand, what are some arguments against raising the minimum wage? What does economics suggest that the effect of raising the minimum wage will be on the quantity of entry level jobs available

Answer 1

Arguments in favor of raising minimum wage

• It will motivate more workers to enter the work force
• It will raise the income of workers, and hence increase their consumption, and aggregate demand
• It will improve their behavior and attendance levels
• It may lower inequality in society
• It may reduce the need for the government to provide other forms of subsidy

Arguments against raising minimum wage

• It will increase the cost of production for suppliers
• It will raise unemployment, as more workers will enter the job market, but jobs are not available
• It will increase the number of workers who have low experience and low skills
• Overall price levels in the economy will rise, thus may hurt consumption
• Employers will now prefer to hire only a few high skilled workers, rather than many low skilled workers

Effect on quantity of entry level jobs available

Since minimum wages will make labor costlier, employers will respond by lowering the quantity of jobs available. They will cut down on hiring of low skilled workers, as they would command the minimum wage. Employers would rather extract more work out of the high skilled workers.

Labor demand will fall, while labor supply will rise. Number of jobs available will be much lower than the number of job seekers.