How does minimum wage laws affect labor markets?
From an economic standpoint, evaluate the effect of a minimum wage on the market for low-wage labor. Include the following:
- Discuss what economic theory predicts will happen
- Draw a supply and demand graph illustrating the effect of a minimum wage
- Discuss what elasticity conditions would economic theory prove to be true or false.
Adhere to the following standards:
- Your paper should be three to five pages in length, not including the title or references pages.
- Incorporate at least three scholarly references that are not required readings for this module.
- Your paper should include an introduction, a body with at least two fully developed paragraphs, and a conclusion.
Solution Preview
Minimum wage is a concept that was created by governments to prevent the market from exploiting people and ensuring that everyone who is working can have a sustainable life that is reasonable even if it’s not the most comfortable. The minimum wage for many countries are stipulated and as such employers are not expected to pay people any lower than that. He current Minimum wage in the United States of America stands at 7.25 dollars / per and this in some states its mostly higher with the 7.25 minimum only applying to mostly the service and fast food industry (Cooper, 2011). According to Peil (1999) he stated that demand will most certainly equal demand in any market that is considered to be competitive and this principle also applied in the market. If the minimum wage was not there employers would readily exploit their workers by giving then quite lower rates, because with a pool of job seekers on the rise employers would certainly pay the individual requesting the least pay and thus satisfying the rule of supply and demand.
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