increases in the minimum wage


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Question 1
Minimum wage debate continues to be bigger and bigger between different stakeholders in the
different industries. According to various research done on the issue of minimum wage, it has
been shown that higher minimum wages lead to loss of jobs of those that are currently employed.
An increase in the minimum wage leads to an increase in the expectations of the employer who
now demands more of the employed workforce to perform more as per the high minimum wage.
Those already employed in a certain industry suffer not only loses in jobs available but also a
reduction in the earnings. The various research done on the matter show that the hours of
working are reduced and thus those employed are well paid the higher minimum wage but work
fewer hours than before. This is shown in the Seattle minimum wage experiment.
Yes, earnings can reduce or remain the same. Consider the Seattle minimum wage experiment
where the initial federal minimum wage was $9.50 per hour. If a certain worker worked for 10
hours a day and is paid $10 per hour, then their daily total wages would be $80. If the minimum
wage is increased to $15, and the employer reduces the working hours to 6 hours, then daily
earnings would remain unchanged at $80 per day.

Question 2
Yes, minimum wages destroy jobs. As a rational employer, if the minimum wage is increased,
one expects more from their employees as per the new increased wage structure. Moreover, the
setting of a minimum wage leads to the destruction of jobs to the unemployed who are searching
for work. However, according to different research conducted by different scholars suggest that
minimum wage does not lead to the destruction of jobs. According to David Neumark, how the

control groups of the research done leads to the concluding that minimum wages lead to job
destruction or not. A close comparison control group done between New Jersey and
Pennsylvania by David Card and Allan Krueger suggests that there was actual job gain in New
Jersey compared to Pennsylvania. This was as a result of an increase in minimum wages in New
Jersey and none in Pennsylvania. However, according to another research done in the year 2004
by Jeffery Clemens and Michael Wither showed that is a closed border control group was
selected and minimum wages increased, then the increase in minimum wages leads to losing of
jobs of workers. In this particular study, the number of workers who lost jobs amounted to
800,000 jobs.

Question 3
Target is paying higher wages than the current federal minimum wage because it wants to keep
hold of the low-income earners in the organization. Some of the workers in the company were
just hired for the holiday season. For this reason, the company had not planned for the hiring of
more staff members during the holiday season and an increase in the minimum wages of the
workers would reduce the amount of employee turn-over that may happen in the organization.
Target understands the effect of employees turn-over especially during a boom period in the
business. Training of employees also costs a lot of money. Thus, Target wishes to pay the new
employees well in order to keep them within the company and reduce their chances of wanting to
leave. The costs of acquiring and training other new employees would be used to invest in other
ventures and opportunities that may benefit Target either in the short run or in the long run.
Target also pays its workers a high minimum wage compared to that of the federal government
because it cares for the welfare and the living standard of its employees and would like to see

their employees grow and develop nicely. Target also pays above the federal wage because it
wants to keep hold of the best employees and one way of doing so is by remunerating the
employees well.

Question 4
If the current equilibrium wages are greater than the minimum wage set by the federal states,
then the market of such workers would lead to unemployment. To explain this further, consider
the following graph;

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