Description of this paper

government is proposing introducing a compulsory increase in the minimum wage

Description

solution


Question

(a) Suppose that the government is proposing introducing a compulsory increase in the minimum wage in the accommodation industry. Hotels are likely to oppose the proposed policy, while minimum wage workers in the industry, such as cleaners, are likely to support it. Using production and cost concepts, illustrate why hotels might oppose a rise in the minimum wage. Using income and substitution effects in an income-leisure choice model, illustrate why a minimum wage worker who is looking to reduce his/her working hours would support this policy.;(b) Several economic studies have found that raising the minimum wage reduces the employment of labour by firms. However, other studies have challenged this by presenting evidence that raising the minimum wage does not significantly reduce employment. Discuss the explanations underlying these two contrasting findings by making reference to at least 2 scholarly journal articles that represent these two viewpoints.

 

Paper#21724 | Written in 18-Jul-2015

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