Answer to Question #253323 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: 140

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, higher wage compared to the previous level, this is due to the fact that the amount of frictional unemployment decreases. At the same level of wages, there were more people who chose unemployment benefits than at the previous level of the minimum wage.

 With the new wage levels, the supply will shrink as fewer and fewer firms pay wages of this size, as entrepreneurs plan to factor in the starting minimum wage when calculating the value of their goods or services.