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Week 1 Dioscussion Minimum Wage 2 - Therefore unemployment...

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The problem with having a price floor like minimum wage is that it increases supply more than the amount of demand. By having minimum wage, there is a greater chance of increasing the unemployment in the region. As the minimum wage increases, greater number of people will be willing to work at a higher wage but there will be fewer jobs available at this higher wage. This is because, as price increases above the equilibrium wage, employers would not find it efficient to employ more workers. Instead of increasing the minimum wage, a lot of economists do favor tax incentives. Would you agree? Disagree? Class? Dr. K Respond This is the point I was trying to make earlier, I just didn’t word it very well. When they hiked minimum wage previous, there was a tremendous amount of layoffs for lower paid restaurant workers. The demand for this rate of pay went down as the wages went up.
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Unformatted text preview: Therefore unemployment in that area rose. Tax incentives seem to be a decent alternative sine they take family income into account. By the articles I read, it seems to be on a more case by case basis. In this case the demand for the lower paid workers would not decrease and therefore the unemployment rate may not be affected. There are other factors that may be avoided by using tax incentives instead of raising the minimum wage. By raising minimum wage businesses my lose profit and therefore may turn to raising prices which would also cause inflation. Businesses may be forced to spend less on training their employees to make up the loss in profits. Sources: http://blogs.wsj.com/washwire/2007/01/09/minimum-wage-vs-earned-income-tax-credit/ http://www.statemaster.com/encyclopedia/Minimum-wage...
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