(a) Describe how this proposed increase in minimum wage would affect the labour
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Question
(a) Describe how this proposed increase in minimum wage would affect the labour market in Ontario? Use Supply- Demand Diagram to illustrate your answer.
"Ontario's Liberal government is raising the minimum wage to $11 an hour" Source: CBC news, January 30th 2014. Describe how this proposed increase in minimum wage would affect the labour market in Ontario? Use Supply- Demand Diagram to illustrate your answer. Clearly identify the winners and losers when government interfere in the free market to set wages for labour? Has the labor market become more efficient or less efficient? ExplainExplanation / Answer
When the government increases minimum wage it causes employers to hire less employees because they still want to make a profit but cannot do so if the input for their products increases. the higher the money they have to put in the less of a product they will produce causing the supply curve to decrease or move to the left.
In a way there really are no winners. With employers firing employees, there is an increase in unemployment which causes demand for many products to decrease because many consumers now do not have the money to pay for many items they deem unnecessary or unneeded to live.
This could cause the labour market to become both more and less efficient depending on the way you look at it. In one view, the market will be less efficient because as said before employers are firing more people so the cost of production stays around the same. It can also decrease because now that minimum wage is higher, indivduals will not look forward to earning a higher degree because they will start to see that they can earn around the same amount of money working in minimum wage jobs instead of spending a large sum for higher education.
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