Minimum Wage Rise Risks Job Cuts and Inflation

Answer the following questions to check your understanding of the story.

What is a minimum wage?

A minimum wage is _____________.

a) a living wage

b) the lowest wage at which a firm may legally hire labor

c) a price ceiling in the labor market

d) the wage firms must pay to attract productive workers

How does a rise in the minimum wage influence the labor market?

A rise in the minimum wage ______________.

a) creates unemployment in all industries

b) creates unemployment in firms that pay a wage rate below the new minimum wage

c) increases employment in firms that pay a wage rate below the new minimum wage

d) creates full employment in firms that pay a wage rate below the new minimum wage

Who wins and who loses from the increase in the minimum wage?

_____________ win and ____________ lose.

a) Workers whose hourly wage rate rises; workers who lose jobs and firms facing higher wage costs

b) Producers on the Isle of Man; residents on the Isle of Man

c) Tourists on the Isle of Man; producers on the Isle of Man

d) Skilled workers; unskilled workers

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