Final answer:
An increase in the minimum wage reduces the total amount paid to the affected workers if the price elasticity of demand is less than one.
Step-by-step explanation:
An increase in the minimum wage reduces the total amount paid to the affected workers if the price elasticity of demand is less than one.
Price elasticity of demand measures how responsive the quantity demanded is to a change in price. If the demand for a good is inelastic (elasticity is less than one), a change in price will lead to a smaller percentage change in quantity demanded. Therefore, when the price of labor (minimum wage) increases, the total amount paid to workers will decrease if the demand is inelastic.
For example, if a 10% increase in the minimum wage results in a 5% decrease in employment, the total amount paid to the affected workers will decrease because the decrease in employment is greater than the increase in wage.