Question

In a recent speech, the governor of your state announced: “One of the biggest causes of juvenile delinquency in this state is the high rate of unemployment among 16 to 19-year-olds. The low wages offered by employers in the state have given fewer teenagers the incentive to find summer employment. Instead of working all summer, the way we used to, today’s teenagers slack off and cause trouble. To address this problem, I propose to raise the state’s minimum wage by per hour. This will give teens the proper incentive to go out and find meaningful employment when they are not in school.” Evaluate the governor’s plan to reduce juvenile delinquency.

Short answer

The Governor’s plan of reducing unemployment will be unsuccessful

Step-by-step solution

Definition of the minimum wage: 

The term minimum wage implicates the minimum cost a firm has to bear to hire labor. The government sets a price floor to the wage below which the firm cannot purchase labor inputs from the labor force.

Pros and cons of the governor’s plan: 

The government implemented such a plan to increase incentives among the youngsters to search for a proper job rather than creating trouble. An increase in the wage rate will attract the labor force, and the supply of labor will increase in the labor market for the firms to hire. Thus, the youngsters would get an incentive to stop participating in unlawful behavior for money.

However, the governor has forgotten that a change in the wage rate will also change the labor demand. The firms will now hire fewer workers as the cost of labor inputs has increased. Such a situation would cause an increase in the employment rate in the economy, as a surplus of labor will occur in the labor market. Such would in turn increase inparticipation of the youngsters in unlawful acts.