Question

Raising the minimum wage is an argument that has been had for years. It is hoped that by increasing the income of these workers that their quality of living will be able to increase as well. However, this event can lead to employers laying off their workers due to new budget constraints. As an employer, it is important for businesses to try and maintain a positive economic profit so that they are able to produce their products at a stable rate while increasing the minimum wage. As these profits progress ,and hopefully increase, businesses are then able to take it upon themselves to increase the quality of their product or bring in more employees. Both of these options would benefit the economy since it allows for consumers to use the money they have made from working and put it back into the economy through their purchases. Why do you agree.

Answer 1

Answer - When the minimum wages are set , they are always set above the equilibrium point . This means that at that wage rate , the supply of workers is greater and the demand is lesser. This leads to unemployment . This is done by producers in order to avoid their production cost from increasing. The saving in these labor cost , provide the incentive to the producer to employ more capital , produce goods more efficiently. This leads to higher saving in cost and the incease in the profits. These profits can be futher used to expand production and employ more workers or increase the wages of existing workers. This will lead to the rise in the income of workers and help them raise their standard of living through more purchases.