Chapter 06 News Analysis: Should the Minimum Wage Increase? 15 Labor Market WAGE (Dollars per hour) 12 0 0 200 400 600 Labor Supply + Wage Rate (Dollars per hour) $11.7 Labor Demanded 220 Labor Supplied 780 (Thousands of workers) (Thousands of workers) Surplus Labor 560 (Thousands of workers) Labor Demand Labor Demand Shifters Tax Credit 0 (Dollars per hour) 800 1000 QUANTITY (Thousands of workers) Suppose the minimum wage in this economy is $11.70 per hour. An unemployed worker is defined as someone who is willing to work at the prevailing wage but is unable to find employment. Because the minimum wage lies above the equilibrium wage, it is binding, which means it is also the prevailing wage. If the wage is not allowed to fall below $11.70 per hour, the size of the unskilled labor force is workers are considered unemployed. workers, and unskilled The unemployment rate is defined as the percentage of unemployed workers in the labor force: Unemployment Rate = Labor Force Unemployed x 100 At a minimum wage of $11.70 per hour, the unemployment rate among unskilled workers is approximately Recall that according to the article, a bill moving through the legislature would allow small businesses in Illinois to collect a tax credit to offset the additional cost of a higher minimum wage. The previous graph shows an initial tax credit of $0. For simplicity, assume that small businesses are the primary demanders of unskilled workers, and they would receive a tax credit equating to $1 per hour. True or False: With a minimum wage of $11.70, unemployment of unskilled workers is lower with the tax credit versus without it. True False
Chapter 06 News Analysis: Should the Minimum Wage Increase? 15 Labor Market WAGE (Dollars per hour) 12 0 0 200 400 600 Labor Supply + Wage Rate (Dollars per hour) $11.7 Labor Demanded 220 Labor Supplied 780 (Thousands of workers) (Thousands of workers) Surplus Labor 560 (Thousands of workers) Labor Demand Labor Demand Shifters Tax Credit 0 (Dollars per hour) 800 1000 QUANTITY (Thousands of workers) Suppose the minimum wage in this economy is $11.70 per hour. An unemployed worker is defined as someone who is willing to work at the prevailing wage but is unable to find employment. Because the minimum wage lies above the equilibrium wage, it is binding, which means it is also the prevailing wage. If the wage is not allowed to fall below $11.70 per hour, the size of the unskilled labor force is workers are considered unemployed. workers, and unskilled The unemployment rate is defined as the percentage of unemployed workers in the labor force: Unemployment Rate = Labor Force Unemployed x 100 At a minimum wage of $11.70 per hour, the unemployment rate among unskilled workers is approximately Recall that according to the article, a bill moving through the legislature would allow small businesses in Illinois to collect a tax credit to offset the additional cost of a higher minimum wage. The previous graph shows an initial tax credit of $0. For simplicity, assume that small businesses are the primary demanders of unskilled workers, and they would receive a tax credit equating to $1 per hour. True or False: With a minimum wage of $11.70, unemployment of unskilled workers is lower with the tax credit versus without it. True False
Chapter1: Making Economics Decisions
Section: Chapter Questions
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Transcribed Image Text:Chapter 06 News Analysis: Should the Minimum Wage Increase?
15
Labor Market
WAGE (Dollars per hour)
12
0
0
200
400
600
Labor Supply
+
Wage Rate
(Dollars per hour)
$11.7
Labor Demanded
220
Labor Supplied
780
(Thousands of
workers)
(Thousands of
workers)
Surplus Labor
560
(Thousands of
workers)
Labor Demand
Labor Demand Shifters
Tax Credit
0
(Dollars per hour)
800
1000
QUANTITY (Thousands of workers)
Suppose the minimum wage in this economy is $11.70 per hour. An unemployed worker is defined as someone who is willing to work at the prevailing
wage but is unable to find employment. Because the minimum wage lies above the equilibrium wage, it is binding, which means it is also the
prevailing wage.
If the wage is not allowed to fall below $11.70 per hour, the size of the unskilled labor force is
workers are considered unemployed.
workers, and
unskilled
The unemployment rate is defined as the percentage of unemployed workers in the labor force:
Unemployment Rate =
Labor Force
Unemployed x 100
At a minimum wage of $11.70 per hour, the unemployment rate among unskilled workers is approximately
Recall that according to the article, a bill moving through the legislature would allow small businesses in Illinois to collect a tax credit to offset the
additional cost of a higher minimum wage. The previous graph shows an initial tax credit of $0. For simplicity, assume that small businesses are the
primary demanders of unskilled workers, and they would receive a tax credit equating to $1 per hour.
True or False: With a minimum wage of $11.70, unemployment of unskilled workers is lower with the tax credit versus without it.
True
False
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