Question

According to the conservatives, when the minimum wage is abolished, the wage rate for marginal workers will (LO7) 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

According to the conservatives, when the minimum wage is abolished, the wage rate for marginal workers will \(fall\) and employment will \(rise\). Therefore, the correct answer is b) fall and employment will rise.

Step-by-step solution

1. Understanding the concept of marginal workers

Firstly, we need to understand who marginal workers are. Marginal workers are those employees who work only for a few hours due to various reasons like getting low pay or not having enough hours to work on a job they would like to continue. These workers are sometimes considered less productive and may not bring much value to the firm.

2. Understanding the conservative's perspective on minimum wage

The conservatives argue that minimum wage regulations can harm employment prospects for marginal workers. When there is a legal minimum wage, employers may not want to pay a worker more than they believe they are worth. Therefore, a minimum wage can make it difficult for marginal workers to find employment.

3. Analyzing the effect of abolishing minimum wage on wage rate and employment

Now, let's think about what happens when the minimum wage is abolished. Employers can now pay workers according to their productivity. Hence, the wage rate for marginal workers, who are less productive, may fall. Moreover, as the wage rate falls, employers may become more willing to employ these marginal workers. This is because the cost of hiring them has now decreased. As a result, the employment of marginal workers may rise.

4. Choosing the correct answer

Based on our analysis in step 3, we can conclude that when the minimum wage is abolished, according to the conservatives, the wage rate for marginal workers will fall and the employment will rise. Therefore, the correct answer is: b) fall and employment will rise.

Key concepts

Marginal Workers

Marginal workers are an essential aspect of the labor market. They typically represent employees who are employed for a limited number of hours or are working in jobs that are considered less desirable, often due to low pay or insufficient work hours to make a living. These individuals might include part-time workers, seasonal employees, interns, or those in transitional employment.

One reason they are considered 'marginal' is that their productivity is often perceived as lower compared to full-time employees. They may also lack the skills or experience of their counterparts, making them more vulnerable to changes in labor market conditions. Employers might value the flexibility these workers offer, but they are also the first to be affected when economic policies, such as the minimum wage, are in flux.

Understanding the plight of marginal workers is crucial. They often face job insecurity and might have to accept wages below what is needed to sustain a decent standard of living. As such, they are a group that can significantly be affected by economic policies.

Minimum Wage Abolition

The concept of minimum wage abolition sparks a great deal of debate among economists and policymakers. Minimum wage is the lowest legal payment per hour that workers can be paid. It's designed to protect workers from exploitation and to ensure a basic standard of living.

Concerning marginal workers, the absence of a minimum wage might mean that their wages could decrease, as employers would be free to offer pay based on their perceptions of worker productivity. Proponents of abolition argue that this could lead to increased employment, claiming that businesses would hire more workers if they could pay lower wages.

Critics of minimum wage abolition maintain that it could lead to a race to the bottom in terms of wages, potentially exacerbating poverty and inequality. They argue that a living wage is necessary to ensure that work can sustain a reasonable standard of living. The key argument for those in favor is that market forces, rather than government mandates, should determine wages, allowing for a more flexible and adaptive job market.

Employment Rate

The employment rate is a crucial indicator of the health of an economy, representing the percentage of the working-age population that is employed. It is affected by various factors, including economic policies, market conditions, and demographic changes.

When examining the relationship between minimum wage laws and the employment rate, there are competing theories. Some argue that eliminating the minimum wage would boost employment because businesses could afford to hire more workers at lower wages. This increased demand for labor, particularly for marginal workers, could potentially raise the employment rate.

However, it's not guaranteed that the rise in employment would be beneficial overall. Lower wages could result in less consumer spending power, possibly leading to a decrease in demand for goods and services and an adverse effect on the economy as a whole. Additionally, a higher employment rate with poor wage conditions could still mean difficulty for employees in achieving a livable income, suggesting that the quality of employment is just as important as the quantity measured by the employment rate.