Question

What is the added worker effect?

Summarize the evidence regarding the impact of the minimum wage on employment.

Answer 1

Answer:

1.

2.

There has been consensus among economist that minimum wage imposition by legislation results in job loss. It is because of the fact that demand curve labour is downward sloping. It means rise in wages, because of imposition of minimum wage, results in less demand of labour, which in turn causes unemployment of the affected groups. Series of studies conducted on this subject which stated that unskilled labour and teenagers are the ones who were adversely affected by the legislation. A paper was published in the year 1982(by Charles brown) concluded that a 10 percent increase in minimum wage causes 1percent to 3 percent fall in teenage employment One more similar study was conducted between 1990 and 1991. It concluded that 27 percent increase in minimum wage between 1990 and 1991 causes 4 percent fall in teenage employment