Question

In a recent speech, the governor of a neighboring state announced: “One of the biggest causes of juvenile delinquency in this state is the high rate of unemployment among 16 to 19-year old employees. The low wages offered by employers in the state have given fewer teenagers the incentive to find summer employment. Instead of working all summer, the way we used to, today’s teenagers slack off and cause trouble. To address this problem, I propose to raise the state’s minimum wage by $1.50 per hour. This will give teens the proper incentive to go out and find meaningful employment when they are not in school.”

a. Evaluate the governor’s plan to reduce juvenile delinquency. Include at least one supply and demand analysis
    in your response. You may safely assume that there is a positive correlation between teenage unemployment
    and crime in your response. You must clearly state whether you believe crime will be reduced or increased as a
    result of this proposal. (This is an open-ended question but your answer should not require more than a couple
    of paragraphs and a single supply and demand diagram.)

**Please explain in detail how you arrived at the conclusion.

Answer 1

The governor in the neighboring state has increased the minimum wage by $1.50 per hour. We would look into this aspect through demand and supply of jobs. This would in simple terms imply that the supply for jobs has reduced because now the employers would need to pay out extra wages for the same job due to the increase in minimum wage.

Also this would have an impact on demand of jobs also. The demand for jobs would increase because of the fact that minimum wage is now higher.

So the demand curvr would shift to right and the supply of jobs reduces, shifting the supply curve to left.

Here we have assumed that the increase in demand of jobs by teenagers shifts the demand curve in a lesser proportion than the decrease in supply because teenagers are a small part of population but the decrease in supply of jobs is in the whole labour market.

So as in the graph , the wages would increase but the quantity of jobs decreases.

Had the increase in demand be higher than the reduction in supply, the jobs would have increased.

Hence , though the wages have increased, the overall jobs have reduced. So the teenagers may put in more efforts to get jobs because of increased wages and have to face a higher competition, but due to this, their efforts in Crime could reduce because the incentives to search jobs has increased.

(You can comment for doubts)