Ava states, "If raising the minimum wage to $10 an hour is good, like Senator Largess suggests, then raising it to $20 an hour would be twice as good." Is Ava correct? Why or why not?
The minimum wage is a price floor that causes unemployment when it is established above the market-clearing wage for unskilled workers. If the equilibrium wage in this market is $4 an hour and the minimum is $10, workers who aren't worth at least this much to the firm will not be hired. If it is raised to $20, even fewer workers will find jobs. We could suggest that raising the minimum wage is bad, but it would be hard to say that raising it to $20 would be twice as bad. Bads are hard to quantify, and all of this is beyond the value-free world of positive economics. Raises of this nature in the minimum wage will increase unemployment. It is up to the individual to decide if this is good or bad.
You might also like to view...
The adage, "There is no such thing as a free lunch," is used to illustrate the principle that
a. goods are scarce. b. people face tradeoffs. c. income must be earned. d. households face many decisions.
Figure 21-1
In Figure 21-1, a reform in the distribution system that achieves the same distribution with less damage to work incentives is represented by a move from which points?
A. A to B B. C to G C. C to F D. B to C