From an economist’s perspective, if the price of something increases, sellers will be willing to sell more while buyers will buy less. When we are talking about labor, wage rates are the prices, workers are the sellers, and employers are the buyers.
Looking only from an economist’s perspective, what will happen in a market (i.e., labor, employers, customers) when a local government raises the minimum wage from $7.50/hr. to $15/hr.? Work through the effects by assuming the wage suddenly increased, and then conceptually tracing a hypothetical employer’s response when his costs have just risen, and then the customers’ responses to the employer’s response. What will happen to the supply of labor? Who will get hired if more people want to work for $15/hr than there are jobs? Who will not get hired? Pick a local business and consider the short, medium and long term decisions and effects. The longer the time horizon, the more options buyers and sellers have.
DO NOT discuss the justification (or lack thereof) for a minimum wage, or any arguments about the merits or design of minimum wage policies. This discussion is strictly confined to the expected results of an immediate doubling of the minimum wage in a city–that is the market impacts of a sudden change in price (i.e., the price of labor).
Note: It is more important to post early in the week and several times by the end of Week 1 than to read articles on the minimum wage. The purpose of this week’s dialogue is to get you thinking like economists rather than reading political commentaries on minimum wage policy.