Final answer:
An increase in the minimum wage does not necessarily have large effects on employment levels. Higher wages might increase demand for labor or lead to increased productivity and reduced turnover, offsetting the costs. Thus, the most likely answer is B. no change in Yn.
Step-by-step explanation:
When considering the impact of an increase in the minimum wage on the natural level of employment (Yn), it's important to look at several factors that economists consider.
Recent empirical studies have shown that an increase in the minimum wage does not necessarily lead to large employment effects, such as significant job losses. This may be due to multiple reasons:
- Higher wages can increase demand for goods and services since workers have more income to spend, potentially increasing the demand for labor.
- In some scenarios, higher wages lead to an increase in productivity from workers, which could offset the cost of higher wages.
- Reduced turnover resulting from higher wages can benefit firms, as constant hiring and training can be costly and disrupt productivity.
- Price effects may occur, where businesses pass on the cost to consumers, potentially mitigating employment effects.
Therefore, the answer to the question 'An increase in the minimum wage will cause' is B. no change in Yn (natural level of employment), as these studies suggest that the direct relationship between minimum wage increases and employment levels may not be as straightforward.