Question

Nccording to the conservatives, when the minimum wage is abolished, the wage rate for marginal workers will (1.07) a) fall and employment will fall b) fall and employment will rise c) rise and employment will rise d) rise and employment will fall

Short answer

b) When the minimum wage is abolished, the wage rate for marginal workers will fall, and employment will rise, according to the conservative perspective.

Step-by-step solution

Understand the Terminologies

First, let us understand the key terms involved: 1. Minimum wage: It is the lowest wage that employers can legally pay to workers. 2. Marginal workers: These are workers who are typically less skilled or have a limited work history, and their productivity is lower than the average worker. 3. Employment: It refers to the number of people who are employed or have a job.

Analyze the Conservative's View

According to the conservative perspective, the minimum wage is seen as a barrier for employers, making it harder for them to hire more workers or pay higher wages. If the minimum wage is removed, they believe that the wage rate for marginal workers would adjust according to their productivity or skill, without any legal constraint. This, in turn, is expected to impact the employment rate.

Compare the Four Scenarios

a) If the minimum wage is abolished, and the wage rate falls, it is unlikely that the employment will fall, as employers would be more likely to hire additional workers at lower wage rates. b) If the minimum wage is abolished, and the wage rate falls, it would be expected that the employment will rise, as employers would be more likely to hire additional workers at lower wage rates. c) If the minimum wage is abolished and the wage rate rises, it doesn't align with the conservative view that the abolition would make it easier for employers to hire additional workers at lower wage rates. d) If the minimum wage is abolished and the wage rate rises, it is unlikely that employment will fall, as the higher wage rate would contradict the conservative perspective

Choose the Correct Option

Based on the conservative view and analysis of the four scenarios, the most plausible option is: b) fall and employment will rise

Key concepts

Marginal Workers

Marginal workers are individuals whose skills or work history may not be as competitive or established as the average worker in the job market. Typically, they are less skilled and therefore contribute less economic value compared to other workers. This can be due to a variety of reasons, such as lack of education, training, experience, or even physical or mental disabilities.

In economic terms, marginal workers are often paid lower wages due to their productivity levels, which are perceived to be at the 'margin' of what employers are willing to pay for their services. The debate surrounding the minimum wage directly impacts these workers. Proponents argue that minimum wage ensures marginal workers can earn a living wage; whereas opponents contend that setting a mandated minimum wage may result in fewer employment opportunities for these individuals as employers might be reluctant to hire workers whose productivity is below the set wage level.

Therefore, from a conservative perspective, removing the minimum wage could theoretically increase the number of job opportunities for marginal workers, as they could be employed at a wage that matches their productivity.

Employment Rate

The employment rate is a key indicator of the health of an economy, representing the percentage of working-age people who are currently employed. It provides insight into how well the labor market is able to absorb those who are willing and able to work. A high employment rate suggests a thriving economy with plentiful job opportunities, while a low employment rate can indicate economic distress or a shortage of available jobs.

When discussing the relationship between minimum wage laws and the employment rate, opinions vary. Certain economic models suggest that setting a higher minimum wage could lead to a decrease in employment, especially among marginal workers, as it raises the cost of labor for employers. This perspective is often associated with conservative economic thought, which argues for reduced regulation in markets, including labor markets, to allow for more flexible employment practices and potentially higher employment rates.

Conversely, other viewpoints contend that a higher minimum wage can stimulate economic activity by increasing consumer spending, potentially leading to job growth. Clearly, the interplay between minimum wage policies and the employment rate is complex and subject to ongoing debate among economists and policymakers.

Conservative Perspective on Wages

The conservative economic perspective concerning wages fundamentally hinges on the principles of free-market capitalism. It posits that wage rates should be determined by the market forces of supply and demand, without government intervention – such as minimum wage laws.

From this viewpoint, when wages are set artificially high through minimum wage regulations, it may lead to unintended consequences, such as reduced employment opportunities for marginal workers. Conservatives argue that employers, facing higher labor costs, might hire fewer workers or invest in automation. They believe that eliminating minimum wage laws would create a flexible labor market where anyone willing to work could find employment at a wage reflective of their skill and productivity level.

Critics of this approach, however, point out potential issues such as an increased risk of exploitation and income inequality. They argue that in absence of regulations, there could be a 'race to the bottom' with employers paying as little as possible, thereby harming the living standards of workers. These debates underscore the contentious nature of wage policy and its profound impact on the economy and society at large.