Question

The federal minimum wage has not kept pace with inflation over time. Mankiw said that if minimum wage increased, the balance between labor supplied and labor demanded would be off balance (2021). The real minimum wage in this FRED graph shows that people in 1990 were only getting paid slightly less than where minimum wage optimally should have been, yet they were still at an even level to balance labor (FRED, N.D.). Today there is a major discrepancy between the real minimum wage and the nominal minimum wage. Inflation is high causing a large gap between nominal and real minimum wages. To keep the labor balance and offset the inflation rate, there can be a slight increase to minimum wage, which can help to even out the gap and improve the cost of living for the people.

Answer 1

The subject of this question is Economics. The federal minimum wage has not kept pace with inflation, causing a discrepancy between the nominal minimum wage and the real minimum wage. A slight increase in the minimum wage can help balance labor and improve the cost of living.

Step-by-step explanation:

The subject of this question is Economics.

According to the information provided, the federal minimum wage has not kept pace with inflation over time. This means that the real value of the minimum wage has decreased, causing a discrepancy between the nominal minimum wage and the real minimum wage. The decline in the real minimum wage can create an imbalance between labor supplied and labor demanded. To offset this imbalance and improve the cost of living for people, a slight increase in the minimum wage can be considered.