Answer to Question #94279 in Microeconomics for Lesego

Question #94279
In 2002 the South African government introduced the minimum wage for domestic workers. With effect from the 1st of January 2019 it has been revised to R15 per hour with the exception of workers working fewer hours in certain areas. https://www.parent24.com/Family/Finance_Legal/What-is-the-minimum-wage-for-domestic-workersand-nannies-20150826 Accessed: 24/02/2019 With the aid of a diagram, discuss the welfare effects of such a policy if the wage rate set is above the market clearing wage rate (assuming this is R12 per hour).
1
Expert's answer
2019-09-12T11:04:35-0400

If the National minimum wage increases and is above the market clearing rate, a situation of excess supply would prevail in the South African economy. If R 12 per hour is the market clearing wage rate, the demand for labour would equal the demand for labour supply creating a state of equilibrium.


However, if the Government raises the wage rate to R 15 per hour, it would distort market behaviour and disequilibrium would prevail. At this rate, the number of workers would increase. However, unemployment would increase as firms would only hire few workers due to the increased wage rate.





Need a fast expert's response?

Submit order

and get a quick answer at the best price

for any assignment or question with DETAILED EXPLANATIONS!

Comments

Manana
04.11.20, 13:27

I realy appreciate your good work keep on helping me through my school work to be succesd. Thank you

Leave a comment

LATEST TUTORIALS
New on Blog
APPROVED BY CLIENTS