Discuss the effects of the wage subsidy for unskilled labor on all factors of production, that...
Discuss the effects of the wage subsidy for unskilled labor on all factors of production, that is, both types of labor and capital.
I am writing a paper and need to understand this is detail.
Homework Answers
Wage subsidy can be defined as the financial incentive or stimulus that is provided to the organizations or the employers at the time of hiring employees. The wage subsidy covers the initial cost of the employers and motivates the employers to hire more eligible employers.
The wage subsidy for unskilled labors will lead to an increase in the demand for unskilled labors as it will create more employment opportunities to unskilled labors. The wage subsidy for unskilled labors will compel the firm to substitute capital for unskilled labors till the extent it is possible. Therefore, the demand for capital will also fall. The firms will also use more of unskilled labors that skilled labors but in some cases firms cannot substitute skilled labors with unskilled labors. So, the demand for skilled will not fall but not much.
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Discuss the effects of the wage
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