In a recent speech, the governor of your province announced: “One of the biggest

Question

In a recent speech, the governor of your province announced: “One of the biggest causes of juvenile delinquency in this province is the high rate of unemployment among 16 to 19-year old. 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 province’s minimum wage by $1.50 per hour. This will give teens the proper incentive to go out and find meaningful employment when they are not in school.” Do you agree or disagree with the governor? Please explain.

Explanation / Answer

I disagree.

A higher minimum wage in the economy will increase the employment cost for the firms and increase the price of the goods. If the firm wants to be competitive in the market they will look for cost-cutting and reduce the number of labor they are employing, they might go for mechanising the production process or look for alternatives. It will increase the problem of unemployment even more and the teenagers will remain the same.  

If the teenagers need to be employed the governor need to increase the demand and then firms will employ more and more labor. Higher demand for labor will increase the wage an artificial increase is harmful to the business and the teenagers.

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