Question

Which of the following are potential problems with increasing minimum wage in comparison with other poverty - fighting tools such as?

A. Employers might shift to more capital - intensive production because labor is relatively more expensive.
B. Fewer low - income workers will be employed.
C. There will be more lower - skilled workers entering the labor force looking for work and more jobs for them.
D. Lower - income workers will earn more.
E. There will be a shortage of workers in low - wage jobs.

Answer 1

Increasing minimum wage could lead to employers favoring capital-intensive production, potentially reduce employment for low-income workers, and set barriers for lower-skilled workers, although some effects might be mitigated by higher worker productivity and spending.

Step-by-step explanation:

The potential problems with increasing the minimum wage relative to other poverty-fighting tools include potential shifts in employer behaviors and impacts on the labor market. Firstly, employers might shift to more capital-intensive production if labor becomes relatively more expensive, as mentioned in statement A.

Secondly, there's the possibility of fewer low-income workers being employed due to increased labor costs, aligning with statement B.

Notably, this doesn't always translate into fewer jobs; instead, demand due to increased income could stabilize employment, and higher wages might lead to more productive workers.

However, well-known economists like Walter Williams and Thomas Sowell suggest that higher minimum wages could pose employment barriers for lower-skilled workers, potentially reducing their employment opportunities and limiting economic mobility.