How would businesses and the economy react?
How would businesses and the economy react?
Is that a troll handle? Something's fishy.
watch workaholics bro.
Never heard of it. A TV show, I assume?
Paul Ryan would be smilin
1. Fewer laborers enter the job market and seek those jobs because fewer people are willing to work for $1.00 per hour than $7.25. This decreases the unemployment rate simply because fewer people are seeking work.
2. Businesses demand more laborers at $1.00 per hour than at $7.25. Businesses only hire/retain workers if their net impact on revenue (marginal revenue product) is greater than it costs to employ them (marginal resource/labor cost). By lowering the cost of minimum wage labor, more workers will fulfill this requirement, and more workers will be hired/retain their jobs. This also lowers the unemployment rate.
3. The minimum wage workers that get/retain their jobs are worse off with the lower wages. Their purchasing power goes down, which hurts the businesses they purchase from, etc. This decreases aggregate demand within the economy.
4. All firms that decrease wages, increase labor, or hire more workers are better off because they are either more productive or more profitable (or both). In the short run, aggregate supply rises. At the same time, they may experience a modest drop in demand for their products because the other minimum wage workers out there have less to spend.
5. This decrease in aggregate demand (#3) and increase in short-run aggregate supply (#4) both have the effect of driving the price level down (deflation).
So deflation is likely, but probably not a big deal because deflation has not been a problem in recent years. The impact on rGDP...it depends. Bad government policy would include some sort of small but effective program offering zombification for workers who would be hired. In other words, decrease worker skills such that they justify their lower wages through decreased productivity.
welllll, back in the day ...
unemployment would drop
Hot Earth.
People would now make $1 per hour.
That would be just fine because no employer would be paying $1.00 per hour. Workers would drop out of the workforce creating a scarcity of labor, forcing employers to pay more to attract workers. This scarcity of labor would drive wages up until an equilibrium was reached. Much better than setting a minimum wage too high that lowers demand for workers and puts more people out of work. The invisible hand can take care of the market just fine.
Millions of jobs of all wage levels would be created quickly. We would have low wage workers doing menial tasks, but we would also need engineers to design new factories, machines, and processes, skilled tradesman to build and maintain all of those things, teachers to train prople for actually useful functions, accountants to keep track of all the new workers on payroll, and so on. Industrial productivity would surge, bringing about higher living standards and allowing us to balance our trade and pay our debts back to foreigners. The anti-capitalist nihilists would shriek in horror at the sights of all the prosperity.
The families that were depending on $7.75 would starve. Why do you think we have a minimum wage to begin with?
coach d wrote:
The families that were depending on $7.75 would starve. Why do you think we have a minimum wage to begin with?
To say nothing about those depending on minimum wage...
We might turn out like the other chaotic cesspools that have no minimum wage - Norway, Sweden, Finland, Denmark, Iceland, Germany...
coach d wrote:
Why do you think we have a minimum wage to begin with?
To antagonize business owners and make it harder for them to operate profitably.
coach d wrote:
The families that were depending on $7.75 would starve. Why do you think we have a minimum wage to begin with?
Positions that are worth $7.75 will command $7.75 in the absence of a minimum wage. If the minimum wage is set at $9.50, jobs that are only worth $7.75 will be terminated, and the people who depend on that income will starve because the minimum wage made it illegal for them to work.
Rational Economics wrote:
coach d wrote:The families that were depending on $7.75 would starve. Why do you think we have a minimum wage to begin with?
Positions that are worth $7.75 will command $7.75 in the absence of a minimum wage. If the minimum wage is set at $9.50, jobs that are only worth $7.75 will be terminated, and the people who depend on that income will starve because the minimum wage made it illegal for them to work.
This ^
The fact that so many fall for the minimum wage smoke and mirrors is just scary. You want to make $9.50/hr? Raise your skills to be worth $9.50/hr. No government magic wand needed.
Do you folks really want people to be told, "No, you may not accept that job offer for $6.50/hr" by our all-wise government and have them be unemployable instead?
Think people. Think.
Nothing would change.
Rational Economics wrote:
coach d wrote:The families that were depending on $7.75 would starve. Why do you think we have a minimum wage to begin with?
Positions that are worth $7.75 will command $7.75 in the absence of a minimum wage. If the minimum wage is set at $9.50, jobs that are only worth $7.75 will be terminated, and the people who depend on that income will starve because the minimum wage made it illegal for them to work.
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this is the correct answer. anyone who has taken a basic economics class and learned the very basics of supply and demand wold understand this.
the law of supply and demand is as much a law as the law of gravity.