Answer to Question #252105 in Economics for saleemaslam

Question

The British Columbia government recently increased the minimum wage from $14.60 per hour to $15.20 per hour. The new minimum wage was implemented as of June 1, 2021. Drawing from what you have learnt on the topic “labour demand” and from related literature, what do you think might be the implications on employment and wages in the Province?

word limit: 50

Answer 1

With an increase in the minimum wage, the volume of supply in the labor market will increase, that is, more people will agree to work for a new wage, this is due to the fact that the amount of frictional unemployment decreases. At the previous level of wages, there were more people who chose unemployment benefits than the previous level of the minimum wage.

 With the new wage level, the supply will decline, as fewer and fewer firms will pay wages of this size since entrepreneurs plan to take into account the initial level of the minimum wage when calculating the cost of their goods or services.