Question

True or False: In a competitive labor market, increasing the minimum wage always raises the number of employed workers.

Answer 1

I believe it’s true

Answer 2

It is FALSE that in a competitive labor market, increasing the minimum wage always raises the number of employed workers.

• This is because when the minimum wage increases, the cost of employing and maintaining employees will increase.

• This situation would, however, reduce the capacity at which firms or companies can employ more staff.

• Thus, the unemployment rate would increase, as there will be less financial means to employ additional workers.

Hence, in this case, it is concluded that in a competitive labor market, increasing the minimum wage always lowers the number of employed workers.

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