Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

1.By what percentage did: TABLE 30.2 Minimum Wage History Oct. 1938 $0.25 Jan. 1978 $2.65 Oct. 1939 0.30 Jan. 1979 2.90 The federal minimum wage

image text in transcribed

1.By what percentage did:

image text in transcribed
TABLE 30.2 Minimum Wage History Oct. 1938 $0.25 Jan. 1978 $2.65 Oct. 1939 0.30 Jan. 1979 2.90 The federal minimum wage has Oct. 1945 0.40 Jan. 1980 3.10 been increased periodically Jan. 1950 0.75 Jan. 1981 3.35 since first set in 1938. In 2007 Mar. 1956 1.00 Apr. 1990 3.80 Congress raised the minimum to Sept. 1961 1.15 Apr. 1991 4.25 $7.25, effective July 2009. Sept. 1963 1.25 Oct. 1996 4.75 Feb. 1967 1.40 Sept. 1997 5.15 Feb. 1968 1.60 July 2007 5.85 May 1974 2.00 July 2008 6.55 Jan. 1975 2.10 July 2009 7.25 Jan. 1976 2.30 act like price takers with respect to wages as well as prices. This phenomenon is also portrayed in Figure 30.7. Minimum Wages Some people will be unhappy with the equilibrium wage. Employers may grumble that wages are too high. Workers may complain that wages are too low. They may seek govern- ment intervention to change market outcomes. This is the goal of Congress when it estab- price floor: Lower limit set for lishes a legal minimum wage-a price floor in the labor market (see Table 30.2). the price of a good. Figure 30.8 illustrates the effects of such government intervention. The market- determined equilibrium wage is W, and q, workers are employed. A government-imposed minimum wage of Wy is then set, above the market equilibrium. So, what happens? There are changes on both the supply side of the labor market and the demand side. On the supply side, the higher wage WM encourages more low-skilled workers to seek employ- ment; the quantity supplied increases from q, to q,. On the demand side, however, the market surplus: The amount number of available jobs declines from q, to q. This leaves a market surplus at the wage by which the quantity supplied WM. As a result of the increased wage, some workers have lost jobs (q, - qa) and some new exceeds the quantity demanded at a given price; excess supply. entrants fail to find employment (q, - q ). Only those workers who remain employed (qa) benefit from the higher wage. Government-imposed wage floors thus have three distinct effects: A legal minimum wage Reduces the quantity of labor demanded, and Increases the quantity of labor supplied, and thereby Creates a market surplus. Labor demand Labor supply Market surplus FIGURE 30.8 WM Minimum Wage Effects Minimum wage WAGE RATE (dollars per hour If the minimum wage exceeds the equilibrium wage, a labor Equilibrium wage rate surplus will result: more workers Workers who will be willing to work at that keep jobs at wage rate than employers will higher wage be willing to hire. Some workers Job losers will end up with higher wages, Entrants who can't find jobs but others will end up ad 9s unemployed. QUANTITY OF LABOR (hours per year)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Bank Management

Authors: Timothy W Koch, Mark S Cracolice

7th Edition

1111804265, 9781111804268

More Books

Students also viewed these Economics questions

Question

The number of new ideas that emerge

Answered: 1 week ago

Question

Technology

Answered: 1 week ago