Minimum wage laws are promoted as the means of increasing the standard of living of the working poor.Which of the following is the most likely adverse consequence of minimum wage laws that makes the working poor worse off?
A)The least skilled workers are priced out of the labor market.
B)Firms respond by increasing other forms of non-wage compensation such as training and holiday pay.
C)The average price level declines,increasing the spending power of the people.
D)The skilled workers end up receiving a below average wage rate.

Question

Quizplus · Accepted Answer

When minimum wage laws increase the wage rate, firms may not be able to afford to hire as many workers, especially those with the least skills and experience. This results in higher unemployment rates among the working poor and less opportunities for them to earn an income. Therefore, minimum wage laws can potentially harm the working poor by pricing them out of the labor market.

Minimum Wage Laws Are Promoted as the Means of Increasing