Policies to reduce poverty Using several types of public policies, the government has attempted to alleviate...
Policies to reduce poverty
Using several types of public policies, the government has attempted to alleviate poverty, with varying success. One example is minimum wage laws.
An important effect of this type of policy is that it can result in unemployment among the workers who are affected by the minimum wage.
The magnitude of the change in unemployment associated with a minimum wage depends on the elasticity of demand for labor.
The more the demand for this type of labor, the lower the unemployment caused by the minimum wage.
Homework Answers
Minimum wage is expected to increase unemployment because it is a legislation that proposes a wage rate which is greater than the market clearing wage rate. Increase in quantity supplied and decrease in quantity demanded will result in unemployment especially among the unskilled workers because they are the ones who will first be unemployed. the level of unemployment created depends upon the elasticity of demand and supply. If the demand is inelastic the generated unemployment will be lower because increase in the wage rate will be proportionately greater than the decline in employment
1) higher unemployment
2) unskilled labour
3) inelastic demand.
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Policies to reduce poverty
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