Question

On April 1, 2009, in the middle of a recession, the government of the province of Ontario, Canada increased the provincial minimum wage from $8.75 to $9.50. What will the likely effect of this policy be? Both the leftward shift in the labor demand curve and the higher minimum wage will lead to an increase in the unemployment rate. Low income workers will be better able to survive the recession at the new, higher wage rate. More people will be hired at the higher wage rate offsetting the effects of the recession. The higher wage will increase the supply of labor offsetting the effects of the recession.

Answer 1

The policy of increasing the provincial minimum wage from $8.75 to $9.50 will likely effect = both the leftward shift in the labor demand curve and the higher minimum wage will lead to an increase in the unemployment rate.

Companies that are successful tend to pay their employees more than the provincial minimum wage thus the change in minimum wage level will not directly affect the number of employees in the company.

Those earning the minimum wage will be able be in danger of losing their jobs when their companies opt to cut down the number of employees to minimize their costs.