Chapter 12 Outline
A. Effect of the Minimum Wage
1. Increasing the wage creates a surplus of labor.
a. Increasing the minimum wage causes the quantity of labor that firms are willing to hire to decrease and the quantity of labor willing to work to increase.
2. Only those workers who remain employed receive higher wages.
a. Over half of the low-wage workers in the United States are members of households with above average family incomes. Thus, only a part of the increase in income caused by the minimum wage benefits low-income families.
3. Because low-skill workers are laid off as the minimum wage increases, many low-income families will be adversely affected.
a. Teenagers are among those most adversely affected by the minimum wage.
4. The structurally unemployed may be adversely affected because the minimum wage provides employers less incentive to offer on-the-job training.
5. The excess supply of labor generated by the minimum wage provides employers with the chance to discriminate if they so choose.
6. Society will lose because the nation's output of goods and services will fall.
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