Question

Discuss the arguments for and against the determination of minimum wages

Discuss the arguments for and against the determination of minimum wages

Homework Answers

Answer #1

Arguments for minimum wage

  • Minimum wage is legal mandated price floor that makes people receive right wages for their work.
  • This supports the people to live with standard of living above poverty.
  • Minimum wage may lead to increase in productivity levels as wages increase aggregate demand increases

Arguments against minimum wage

  • This leads to increase in unemployment as employers cost increase, they start laying off more workers.
  • This results in structural unemployment which is long lasting form of unemployment.
  • It may also leads to increase in the price of product as cost of production now increase because of increase in worker's wages.

Thus, this policy increase the standard of living of many workers and keep them out of poverty but government should not rely solely on this policy only as it has its negative consequences as well.

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