A politician was recently quoted as saying, "Our country can only reach full employment by raising the minimum wage, which would cause the demand for products to increase . . . and eventually cause production to expand." His analysis overlooks the fact that
A) minimum wage legislation increases costs of production (and thus product prices) and creates an excess supply (unemployment) of unskilled labor.
B) automation is the prime cause of unemployment.
C) full employment can only be reached by increasing the minimum wage substantially.
D) minimum wage legislation may increase the employment of low-skilled workers, but this will be offset by an equal reduction in the employment of skilled workers.

Question

Quizplus · Accepted Answer

The politician's statement overlooks the fact that minimum wage legislation actually increases the costs of production for businesses, leading to an increase in product prices. This can cause a decrease in demand for goods and services, potentially resulting in excess supply and unemployment, particularly among unskilled workers. While raising the minimum wage may increase the demand for products and ultimately lead to production expansion, it is not a guaranteed solution for achieving full employment.

A Politician Was Recently Quoted as Saying, "Our Country Can