In Stenland, many workers have been complaining that they cannot survive on minimum wage, the lowest wage an employer is permitted to pay. The government is proposing to raise the minimum wage. Many employers who pay their workers the current minimum wage argue that if it is raised, unemployment will increase because they will no longer be able to afford to employ as many workers.
Which of the following, if true in Stenland, most strongly supports the claim that raising the minimum wage there will not have the effects that the employers predict?
A) For any position with wages below a living wage, the difficulty of finding and retaining employees adds as much to employment costs as would raising wages.
B) Raising the minimum wage does not also increase the amount employers have to contribute in employee benefits.
C) When inflation is taken into account, the proposed new minimum wage is not high as the current one was when it was introduced.
D) Many employees currently being paid wages at the level of the proposed new minimum wage will demand significant wage increases.
E) Many employers who pay some workers only the minimum wage also pay other workers wages that are much higher than the minimum.
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Very Tough CR question from OG 2017
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richachampion
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DavidG@VeritasPrep
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Employers claim: if the minimum wage is raised, there will have to be layoffs.richachampion wrote:In Stenland, many workers have been complaining that they cannot survive on minimum wage, the lowest wage an employer is permitted to pay. The government is proposing to raise the minimum wage. Many employers who pay their workers the current minimum wage argue that if it is raised, unemployment will increase because they will no longer be able to afford to employ as many workers.
Which of the following, if true in Stenland, most strongly supports the claim that raising the minimum wage there will not have the effects that the employers predict?
A) For any position with wages below a living wage, the difficulty of finding and retaining employees adds as much to employment costs as would raising wages.
B) Raising the minimum wage does not also increase the amount employers have to contribute in employee benefits.
C) When inflation is taken into account, the proposed new minimum wage is not high as the current one was when it was introduced.
D) Many employees currently being paid wages at the level of the proposed new minimum wage will demand significant wage increases.
E) Many employers who pay some workers only the minimum wage also pay other workers wages that are much higher than the minimum.
We're trying to show that this claim won't necessarily be true. Think about it in terms of costs/expenses. The incremental increase in minimum wage might represent one kind of expense for the employer. But what about the expense the employer incurred by previously underpaying its employees? If the old costs of underpayment - high turnover, high cost of replacing old disgruntled employees - were as high as the incremental cost of an increased wage, then the net cost increase to the employer of a minimum wage hike would be 0: the cost of higher turnover becomes the cost of higher wages, one expense swapped out for the other. If the net effect on expenses for the employer is a wash, there'd be no reason to layoff workers, as the fundamental financial position of the firm hasn't changed. This is what A gives us.
