Question

Which statement is the most accurate? (LO7) a) The federal minimum wage rate is indexed to the rate of inflation: Each year it's raised equal to the rate of inflation during the previous year. b) Over 10 million Americans are covered by a living wage law. c) There is considerable disagreement as to whether the federal minimum wage helps the unskilled workers more than it hurts them. d) Very few people's wage rates are actually determined by supply and demand.

Short answer

The most accurate statement is option c) "There is considerable disagreement as to whether the federal minimum wage helps unskilled workers more than it hurts them." This statement acknowledges the ongoing debate surrounding minimum wage policies.

Step-by-step solution

Define: Federal minimum wage, Living wage law, Supply and demand

The federal minimum wage is a legally mandated minimum amount that workers must be paid per hour in the United States. A living wage law mandates a specific wage rate that is higher than the federal minimum wage and aims to ensure that workers are able to cover their basic needs. Supply and demand is an economic principle that states that the price of a good or service will adjust until quantity supplied equals quantity demanded. Step 2: Analyzing each statement

Analyze: Each statement provided

a) The federal minimum wage rate is indexed to the rate of inflation: It's important to understand that the federal minimum wage is not automatically adjusted with inflation. Instead, it's typically increased due to legislation. b) Over 10 million Americans are covered by a living wage law: This statement would require a source or reference to verify its accuracy. c) There is considerable disagreement as to whether the federal minimum wage helps the unskilled workers more than it hurts them: This statement refers to an ongoing debate among economists and policymakers about the net benefits (or potential negative consequences) of a minimum wage policy. d) Very few people's wage rates are actually determined by supply and demand: Supply and demand plays a role in determining wages for most occupations in a market economy, although there are other factors like regulations and union agreements that can also influence wages. Step 3: Determining the most accurate statement

Determine: The most accurate statement

Based on the analysis of each statement, option c) There is considerable disagreement as to whether the federal minimum wage helps unskilled workers more than it hurts them seems to be the most accurate, as it acknowledges the ongoing debate surrounding minimum wage policies.

Key concepts

Federal Minimum Wage

The federal minimum wage is the lowest amount an employer can legally pay their workers per hour in the United States. It's a baseline established to protect workers from unfairly low pay.

However, this wage is not tied to inflation, which means it's not automatically adjusted with the cost of living changes over time. Increases to the federal minimum wage come through legislative action, and debates constantly surround the effectiveness and necessity of these increases.

Key points about federal minimum wage include:

• Legally mandated protection for workers.
• No automatic adjustments for inflation.
• Legislation is needed to make any changes.

Living Wage Law

Living wage laws go beyond the concept of the federal minimum wage. These laws aim to ensure that workers earn enough to meet their basic needs. This means living wage rates are typically higher than the federal minimum wage.

Unlike the federal minimum wage, living wage laws are often implemented at local or state levels and can vary widely depending on the cost of living in different areas.

Benefits of living wage laws include:

• Provide enough income to cover essential expenses.
• Reflects local cost of living variations.
• Aims to improve the quality of life for workers.

Supply and Demand

The concept of supply and demand is a fundamental economic principle that describes how the quantity of a good or service provided by producers interacts with how much consumers are willing to buy.

In a labor market, this principle helps determine wages, meaning that wages should theoretically adjust until the number of workers employers want equals the number of workers willing to work.

However, wage determination isn't purely based on supply and demand. Other factors like regulations, living wage laws, and union contracts can influence wage levels.

Some points to keep in mind about supply and demand in wage setting:

• Balances the market by adjusting prices.
• Determines wages in a free market.
• Influenced by regulations and other economic factors.

Economic Principles

Economic principles underpin most decisions about wages and regulations. These principles guide policymakers in balancing the needs of workers, businesses, and the economy at large.

For example, while higher wages can improve workers' lives, they might also lead to higher costs for businesses, potentially affecting employment rates. Conversely, low wages may mean more jobs exist, but they might not provide a sustainable quality of life.

Understanding economic principles can help comprehend the broader implications of wage laws, such as how they can impact inflation, unemployment, and the standard of living.

• Balancing act between different economic needs.
• Impacts inflation, employment, and living standards.
• Guides policy and wage law decisions.