Question

Seattle and California ad the articlè linked below). Why Use the data in the graph and the information in the article to support your opinion Link e b. Would a $15 minimum wage in a city like Jacksonville be an example of a price ceiling or price floor, also explain whether or not the price control is considered binding (effective). c. Many argue that minimum wages can cause unemployment. How would this type of unemployment be categorized? (cyclical, frictional, or structural). Explain. d. Explain the effect a 10% increase of minimum wages would have on both nominal and real wages if during the time since the last wage increase there has been 15% inflation. Initial Post is due by Monday, January 14th Responses to at least two classmates is due by Wednesday, January 16th (no posts may be made beyond this date) to search

Answer 1

B. Minimum wage means no one can pay a wage less than $15. Thus it is an example of Price Floor.

If a maximum price is set then it is known as price ceiling.

In case of price ceiling if the ceiling price is less than equilibrium price then only it is affective.

While in case of a price floor it is effective when it is set above the market equilibrium.

C. Increase in minimum wage lead to unemployment. This type of unemployment can be termed as Structural unemployment. Structural unemployment is caused by the difference between the number of jobs available and the potential (trained) worker.

This mismatch could be due to the reason that potential workers actual value can be less than the minimum wage. That is the worker will not be in a position to work properly. For example only a trained worker with proper skill set can operate machine while untrained worker can't. Therefore, due to minimum wage the firms will prefer to hire only trained workers.

Thus, minimum wages create structural unemployment.

C. Real wage is generally less than the nominal wage. Since, it is adjusted at the inflationary change.

We can determine the real wage by using the following formula

$\large Real wage = \frac{Nominal wage}{CPI} *100$

Let us assume the minimum wage is $20 A 10% increase means the minimum wage is $22. The actual wage that worker receive is nominal wage. Inflation is 15% so a CPI (base year) 100 will grow to 115.

$\large Real wage = \frac{22}{115} *100$

Real wage = $ 19.13

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