Tuesday, January 14, 2014

Learning economics through pictures: $15 minimum wage

Source: weknowmemes.com

Firms have a decision on how to provide their products: they can use labor (workers) or they can use capital (machines).  For some tasks, the choice is pretty obvious.  For home construction, much labor is required.  For farm production, its mostly capital.

For many tasks, however, the decision is close, and it is possible to use either people or machines.  This is true of many jobs that need minimum wage workers.  A $15 minimum wage will make machines more cost-effective.  If the minimum wage increases, we'll see more machines replacing workers, and an increase in unemployment among low-skill workers.

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