Question

Suppose an employer can hire four low-skilled workers to move dirt with shovels at 5/hour, or can hire one skilled worker at24/hour to move the same amount of dirt with a skid loader. What will the employer do if the minimum wage increases from 5/hour to6.50/hour?

1) Hire the one skilled worker
2) Move the dirt on his or her own
3) Ask the government to increase the wage even more
4) Hire the four low-skilled workers

Answer 1

With the minimum wage increase from $5/hour to $6.50/hour, it is financially prudent for the employer to hire the one skilled worker at $24/hour rather than four low-skilled workers, now costing $26/hour, because it saves money and could be more efficient.

Step-by-step explanation:

Suppose an employer has the option to hire either four low-skilled workers at $5/hour or one skilled worker at $24/hour to move the same amount of dirt, with a minimum wage increase from $5/hour to $6.50/hour, the decision-making process changes due to financial implications.The cost of hiring four low-skilled workers would become $26/hour after the wage increase, as opposed to the previous $20/hour. This makes the option of hiring a single skilled worker at $24/hour more economically viable, as the employer would save $2 per hour for the same amount of work done, with potentially higher efficiency and less management required.

Considering the law of demand and the impact of minimum wage laws on employment, it is important to remember that an increase in minimum wage could lead to reduced employment opportunities for low-skilled workers, according to economists like Walter Williams and Thomas Sowell.In this scenario, the employer is likely to hire the one skilled worker as it minimizes costs and maintains productivity, presenting a financially prudent choice in light of the increased minimum wage.