Suppose the market for low-skilled labor is in equilibrium, and then two things

Question

Suppose the market for low-skilled labor is in equilibrium, and then two things happen at the same time. First, a large number of low-skill immigrants enters the country, competing with domestic low-skill workers. Second, these immigrants all want to buy more goods and services, and they typically buy goods produced by low-skill workers. Which of the following will occur in the market for low-skill workers? a.The number of workers employed will rise, but we cannot tell what will happen to the wage rate. b. The wage rate will fall, but we cannot tell what will happen to the number of workers. c. The number of workers employed will fall, but we cannot tell what will happen to the wage rate. d. The number of workers employed will rise, and the wage rate will fall.

Explanation / Answer

Following would occur in the above said condition :

(D) The number of workers employed will rise as the demand for the goods would rise due to immigration. If demand for good increase then new factory would come in existence and they would higher more labor for production. Since supply of labor is also increased due to immigration their would be competition in job market .Labour is perishable in nature and it destroy if it is not employed. So labor would be ready to work in low wage rates. Although wage rates would definitively fall but up to what extent can not be predict.

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