Concerns about the minimum wage increasing and decreasing has been a controversial issue for many years. Although having an increased minimum wage may be beneficial to employee’s and improve living standards, the economy could face many risks. According to an article posted in The New York Times, “California and New York last year approved gradual increases to $15 per hour. (Schreiber 2017). Recent studies have shown that popular cities and states are beginning to raise their minimum wages. This article also presents that when employers are forced to pay more in wages to their employees, they tend to hire more productive workers to offset the costs of the higher minimum, therefore, leaving more unskilled workers in the unemployment spectrum of the economy. This article …show more content…
Structural Unemployment
a. Structural unemployment occurs when there are fewer jobs than workers. This concept can be applied to the article because as the minimum wage increases, employers are going to seek out for more productive workers. Workers that possess skills that aren’t in high demand and workers that lack skills that are in high demand will most likely be unemployed due to structural unemployment because of the lack of jobs for unskilled workers.
2. Aggregate Demand
a. Aggregate demand is the quantity of goods and services demanded in the economy at any given price level. This concept can be applied to the article because as the minimum wage increases, aggregate demand in a competitive market will decrease (shift left) because unskilled workers aren’t employed and are spending less money on goods and services.
3. Aggregate Supply
a. Aggregate supply is the total quantity firms produce and sell at any given price level. This concept can be applied to the article because as the minimum wage increase, aggregate supply in a competitive market will decrease (shift left). This will result in firms having higher costs and passing the higher costs to consumers.
4. Consumer Price Index