Minimum Wage Case Study
1. Analyze what happens when a higher minimum wage is enacted (raising a price floor on the price of labor). Will the number of workers hired change? Why? What might be an unintended consequence of a higher minimum wage law designed to help low income workers?
If the minimum wage was to be higher than currently I will feel that this would have a negative effect on the economy. Let's start off with the most obvious reason if a company has to pay their employees more to build the product then they have to charge more to sell it. This will cause a price increase on everyday objects. For an example if you have to start paying the guy at McDonald's $15 an hour you can't have them there selling $5 hamburgers. You're not going to make no profit …show more content…
However, a local hamburger shop that probably does 10-15 customers during one lunch and they're having to pay six employees to cook and serve they won't be able to cover their cost and it will lead to closing. The other reason a higher minimum wage will be a problem is due to the fact that company will have to have a higher payroll and it won't be able to cover the extra employees. Let me explain this one a little bit better, let's say that you designate a certain amount for payroll. Let's just say every week you can afford to pay employees $1,000 total. Now if you're paying the employees $10 an hour you're able to fit a certain amount of employees. However if you start paying $15 an hour you're going to have less money therefore you might not have enough money to pay all the employees and you will get rid of them. Here's an example just in case if I lost you in that explanation, you have 10 employees you pay them $100 a day that's $1,000. Now if you have 10 employees and you're paying them a 150 a day you going to end up with a total of 1500 so that's an extra $500 your paying. Now …show more content…
Analyze what happens when the price of rent is regulated so that prices are kept artificially low (a price ceiling). What will happen to the availability of apartments? Why? What might be an unintended consequence of a rent control wage law designed to help low income
If the minimum wage was to be higher than currently I will feel that this would have a negative effect on the economy. Let's start off with the most obvious reason if a company has to pay their employees more to build the product then they have to charge more to sell it. This will cause a price increase on everyday objects. For an example if you have to start paying the guy at McDonald's $15 an hour you can't have them there selling $5 hamburgers. You're not going to make no profit …show more content…
However, a local hamburger shop that probably does 10-15 customers during one lunch and they're having to pay six employees to cook and serve they won't be able to cover their cost and it will lead to closing. The other reason a higher minimum wage will be a problem is due to the fact that company will have to have a higher payroll and it won't be able to cover the extra employees. Let me explain this one a little bit better, let's say that you designate a certain amount for payroll. Let's just say every week you can afford to pay employees $1,000 total. Now if you're paying the employees $10 an hour you're able to fit a certain amount of employees. However if you start paying $15 an hour you're going to have less money therefore you might not have enough money to pay all the employees and you will get rid of them. Here's an example just in case if I lost you in that explanation, you have 10 employees you pay them $100 a day that's $1,000. Now if you have 10 employees and you're paying them a 150 a day you going to end up with a total of 1500 so that's an extra $500 your paying. Now …show more content…
Analyze what happens when the price of rent is regulated so that prices are kept artificially low (a price ceiling). What will happen to the availability of apartments? Why? What might be an unintended consequence of a rent control wage law designed to help low income