A wage subsidy would:
A) decrease the demand for labor, lowering wages.
B) increase the demand for labor, increase the wages received by workers, and lower the wages paid by firms.
C) decrease employment by raising the wages paid by firms.
D) decrease the supply of labor, driving wages up and employment down.

Question

Quizplus · Accepted Answer

A wage subsidy increases the demand for labor by lowering the cost of hiring workers for firms. As a result, this creates upward pressure on wages and can help increase the wages received by workers. At the same time, for firms, they would be able to pay lower wages with the wage subsidy since the subsidy offsets the cost of labor. Therefore, a wage subsidy has the potential to benefit both workers and firms by increasing employment and wages.

A Wage Subsidy Would