Final answer:
After the minimum wage increase from $5 to $6.50 per hour, it is cost-effective to hire one skilled worker at $24 an hour instead of four low-skilled workers, as their combined hourly cost would rise to $26.
Step-by-step explanation:
The decision to hire workers to move dirt depends on a cost analysis of the two options in light of the increased minimum wage.
If the minimum wage is raised from $5 to $6.50 per hour, hiring four low-skilled workers would now cost $26 per hour ($6.50 x 4) for the same amount of dirt that a skilled worker with a skid loader could move for $24 an hour.
Therefore, it would be more cost-effective to hire the one skilled worker at $24 an hour than the four low-skilled workers at $6.50 per hour, which would total $26 per hour after the increase in the minimum wage.
Moreover, the context given on minimum wage and living wage debates in the U.S., where the federal minimum wage was $7.25 per hour in 2009, provides insight into the wider implications of such a price floor in the labor market.
The example also illustrates that an annual income at this minimum wage level was below the poverty line, emphasizing the potential need for higher wages to ensure a reasonable standard of living.