Question

Suppose that the minimum wage was increased to $10 per hour. Which of the following would be most likely to result from the minimum wage increase?
a) an increase in the employment of low-skill workers previously employed at wage rates of less than $10 per hour
b) an increase in the number of jobs providing low-skill workers with on-the-job training
c) a reduction in the number of teenagers unemployed
d) an increase in the demand for high-skill workers providing services that are a good substitute for those whose wages were pushed up by the higher minimum wage

Answer 1

Answer:

The answer is D,

Explanation:

The above selected answer is so because as a typical business owner, if i could get the service of a more skilled individual at almost the same rate as a low-skilled worker, i will definitely go for the services of a high skilled worker considering the fact that the difference in wages in negligible.

Example: Lets say company A recruits lower skilled laborers whom they have to train to drive their machine on a regular basis and they pay them a minimum wage of  $5 per hour.

All of a sudden, the government declares a law that the minimum wage must be increased to $10 per hour

There is also a pool of highly skilled laborers who do the same job at $14 per hour.

The increment in minimum wage will cause company A to recruit more of the highly skilled laborers in place of the low skilled laborers whom they don't have to train and yet do the same job because of the negligible difference in the wages.