Question

"If the federal minimum wage is raised gradually to $15-per-hour by 2020, the employment rate for low-wage U.S. workers will be substantially lower than it would under the status quo."

Write your agreement or disagreement with the statement above. You must support your position with reference to economics principles and the use of examples

Answer 1

If minimum wage is raised by fed , it will have impact on employment rate. As wage rate increases, more workers are willing to work. In the classical model, wages are minimum for maintain full employment in the economy. But the efficiency wage theory stood for different levels of wages for different efficiencies. The present day notion is that employer offers higher wages for efficient and skilled workers. The rise in wage rate will boost the incentives to work, save and invest. Thus as far as current labour market are analysed, wages above minimum level will stimulate the incentives to work and production. Thus raising minimum wages to $15 per hour raises the supply of labor in the labor market and provides more incentives to work.