Question

1. What affects the magnitude of job loss resulting from an increase in the minimum wage?
2. What must be true about the elasticity of demand for the total $ going to these workers to increase?
3. What types of information would you want to know if you were to make a normative judgment about increasing the minimum wage?

Students must post their answers with a minimum of 200 words.

Answer 1

1. Because of an increase in minimum wage, magnitude of job loss is affected by the skills and experiences of labors. With an increase in minimum wage, low skilled workers face high competition from experienced and high skilled employees attracted to the new wage rate. After a wage hike, most of the companies displace low skilled workers for high skilled one at that higher wage rate. This creates high job loss and low skilled workers face it difficult finding entry level employment.