After reading this article students might consider whether low economic growth, high minimum wage, or a combination drives up the unemployment rate?
The Outlook. Australia Weighs Whether Its Minimum Wage Is Too High
by: Rachel Pannett
Jan 27, 2015
Click here to view the full article on WSJ.com
TOPICS: Labor Markets
SUMMARY: The Outlook: Higher minimum-wage supporters in the U.S. often point to Australia as a low-unemployment country with one of the world's highest pay floors. Now, joblessness in Australia is rising, and some are calling for a decadelong slowdown in increases to the minimum wage.
CLASSROOM APPLICATION: Students can evaluate the effect of an increase in a country's minimum wage on the country's employment level.
QUESTIONS:
1. (Advanced) What is the effect of an increase in a minimum wage on employment levels? Does the answer depend on the price elasticities of demand and supply for labor?
2. (Introductory) What are possible explanations for increases in Australia's minimum wage being contemporaneous with high employment levels in the country?
3. (Advanced) The column notes the relationship between the rate of increase in a country's minimum wage and its inflation rate. Why is it important to compare the increase in a country's minimum wage and its inflation rate?
by: Rachel Pannett
Jan 27, 2015
Click here to view the full article on WSJ.com
TOPICS: Labor Markets
SUMMARY: The Outlook: Higher minimum-wage supporters in the U.S. often point to Australia as a low-unemployment country with one of the world's highest pay floors. Now, joblessness in Australia is rising, and some are calling for a decadelong slowdown in increases to the minimum wage.
CLASSROOM APPLICATION: Students can evaluate the effect of an increase in a country's minimum wage on the country's employment level.
QUESTIONS:
1. (Advanced) What is the effect of an increase in a minimum wage on employment levels? Does the answer depend on the price elasticities of demand and supply for labor?
2. (Introductory) What are possible explanations for increases in Australia's minimum wage being contemporaneous with high employment levels in the country?
3. (Advanced) The column notes the relationship between the rate of increase in a country's minimum wage and its inflation rate. Why is it important to compare the increase in a country's minimum wage and its inflation rate?
Reviewed By: James Dearden, Lehigh University
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