Question

The national minimum wage is $7.25 per hour for most occupations in the private sector. Over the past several years, support for an increase in the minimum wage has come from a wide variety of sources. Many of those who support an increase in the minimum wage believe this is one way the government should exercise its social responsibility in an attempt to reduce poverty. The following items address the idea of raising the minimum wage from the current federal minimum of $7.25 per hour.

Minimum wage is a price floor. In a paragraph, discuss how an increase in minimum wage will affect the quantity demanded and supplied of labor. Draw the supply and demand of labor using hypothetical numbers or letters to illustrate your answer. Calculate the surplus resulting from a minimum wage increase.

Discuss the unintended consequences of raising minimum wage, as it relates to potential changes in the incentives for low skilled workers to increase their human capital, and for employers to substitute inputs (technology and automation) for labor.

Discuss the impact of increased minimum wage on prices of the products produced by the workers working at, or near minimum wage, and the overall impact on consumer purchasing.

What will be the impact on government spending on entitlement spendings such as welfare, food stamps, and unemployment compensation in light of the fact that changes in the minimum wage can create changes in unemployment and underemployment? In 200 words, explain your answer.

Explain how the change in minimum wage will affect America’s competitiveness in the Global economy.

*{Answer the queations as fast as you can please :) due tomorrow}

Answer 1

A minimum wage is always a contentious issue in the political and economic world. The political leader want to implement the idea as populist measure. It is a common notion that labor is exploited to increase the profit by the employers and so labor is underpaid in most of the cases. The easiest solution is to enact a minimum wage law.

The minimum wage law acts like a price floor and it is set above the equilibrium or market determined wage level. The supply curve tends to be upward sloping and that means the supply of labor will be higher in case of a higher wage rate. The wage rate is influenced by the demand and supply in the market. A worker with a high level of skills will have a higher demand and his wage rate will also be higher. So the lowest skilled labor has an incentive to develop skills to increase his wage rate but a minimum wage law would negate that incentive.

The labor supplied in the market will be higher at a higher wage rate but the labor demanded at that wage rate will be lower because the demand curve tens to be downward sloping. Further, employers will choose to replace human workers with automation or machines. It means there will be labor surplus or unemployment in the market.
A minimum wage law has unintended effect of increasing unemployment in the economy if it is above the equilibrium wage rate.

Wage Rate Labor Supply Labor Surplus Minimum Wage Equilibrium Labor Demand Quantity

This will also affect the government expenditure. An increased unemployment means the government will have an increased burden of welfare payments such as food stamps or unemployment benefits. This will reduce the budget for other required expenditure such labor skill development programs.
The private sector will also witness a rise in the input cost because of a higher wage rate and that will result in increasing the price of the goods or services. This will increase general price levels.

A wage is paid to the labor and it is considered as an input cost. The rise in input cost will push the price of the product higher unless the producer cut his margin. A higher price product will surely not appeal to the customers in the market when cheaper substitutes are available.
An unnatural rise in the wage rate will erode the competitiveness of the labor as well as the economy in world scenario and that will affect the growth of the economy.

Wage Rate Labor Supply Labor Surplus Minimum Wage Equilibrium Labor Demand Quantity